Developing children’s financial literacy has become popular because parents recognize it as an important life skill that can be taught from an early age. Many adults themselves struggle with the practicalities of managing money or of growing wealth because they were not taught these skills early enough at home, school or university.
At first glance it seems parents may be unprepared to transfer this type of knowledge to their children. However, necessity is a great teacher. Most adults had to work through their own mistakes and learn the hard way about the real value of money – how to get it, how to spend it and how to save it, as well as how to stay safe and avoid pitfalls. They are keen to share the results of these experiences for the benefit of their children.
Educating kids about money is not only desirable, but also necessary because it is a skill that drastically improves quality of life.
Most parents believe that children will learn financial literacy at school. Unfortunately, although financial education is taught in some schools in several countries, it still remains limited. In order not to overload the curriculum, educators tend to integrate financial literacy into other subjects and existing courses. Some non-profit organizations and financial institutions try to solve the problem through extracurricular activities and initiatives. But it turns out that children receive basic financial literacy knowledge and skills quite late and rather piecemeal. Schools often lack the necessary specialists in the field, they don’t have the textbooks, and it is not an exam-driven subject and so gets sidelined.
Many teenagers have difficulty understanding money issues, because they lack the basic financial skills. On average, across OECD countries and economies, about 15% of students have no or very low basic financial skills, and only about 10% of students are top performers in financial literacy. This means they can analyze complex financial products and take into account features of financial documents that are significant but not immediately evident, such as transaction costs.
The OECD assessed the financial literacy of around 117,000 15‑year-old students from 20 participating countries and economies – to find out whether they had acquired these skills and are well-prepared to handle their financial affairs.
According to the OECD’s Programme for International Student Assessment (PISA) survey for financial literacy, published in 2020, 45% of 15-year-olds have a payment card or a debit card and 54% have a bank account, but only one in three students (33%) have the necessary skills to manage their bank accounts.
Some 73% of students reported that they had bought something online (either alone or with a family member) during the 12 months prior to the PISA assessment. But only about half of all students felt confident in ensuring the safety of sensitive information when making an electronic payment or using online banking (51%), transferring money (50%) and paying with a mobile device instead of using cash (49%).
The study concluded that parents have the greatest influence on the formation of children's attitudes to financial management. The survey found that an overwhelming 94% of students obtain information about money matters from their parents, and students who do so tend to perform better in financial literacy assessments.
Even though parents play a big role in teaching children good money habits, many lack the confidence or knowledge to successfully teach their children how to manage finances properly.
Here’s where mobile banking applications come to the rescue. They can really support the financial education of both children and parents. Such applications help parents illustrate the value of money, while retaining parental control over what their children do with their funds.
Before deciding which application is best to use, it is worth taking into account the presence of such functions as:
- opening accounts for children using parents’ smartphones
- instant ordering of a payment card for children
- instant top up from parents’ smartphones
- setting spending limits for children
- locking/unlocking the card in case of suspicious transactions
- turning on/off internet payments and/or ATM withdrawals
The app should be flexible so that it can adapt to parents and children as children grow up and mature. For example, parents should have the opportunity to switch off all monitoring functions so that the child can start making financial decisions on their own.
It goes without saying that the banking app should provide children with educational tools that will help them learn how to budget and save money for spending goals.
Plus, modern mobile banking apps tend to support child-parent interaction, as common features include tracking the chores a child needs to accomplish before receiving an allowance from parents.
Each child is different, and each family has its own approach to teaching money, largely depending on what works for the child and the family (when to start offering pocket money, how much to give and whether you need to pay for housework and grades). Modern banking applications should take into account these nuances and be able to adapt flexibly to the needs of each particular family.
We may not be born financially literate, but we can become so. In order for our children to avoid painful financial mistakes and be financially protected in the future, we need to develop financial skills from an early age. This responsibility cannot be assigned only to schools since financial education is not fully included in the curriculum. So, everything depends on our willingness to learn by ourselves and pass this knowledge on to our children.
myTU Mobile Banking for Children is a great place to start. Click here to find out more.