EVER heard the expression “If only I knew then what I know now?” How many of us have said this at some time or the other? I admit I am one of those persons. Somehow years ago being taught how to save and use your money wisely did not seem to be as important as it is now. Parents and guardians alike need to be taught financial literacy so they can in turn teach their children and contribute to the financial security of a family, a community and even a country. Ideally, financial literacy should be taught in schools and reinforced at home, just like other subjects.
You may ask “What is financial literacy?” Financial literacy is the ability to understand how money works in the world: how someone earns or makes it, how that person manages it, how he/she invests it (turnS it into more) and how that person donates it to help others.Why is it necessary to have financial literacy? To answer this question simply, financial literacy is important as it allows individuals to make informed and effective decisions with all of their financial resources.I understand that children are still being told that “money grows on trees”. No wonder we have so many financial problems today. Let us detail some important concepts that children need to understand as they begin this journey of money literacy!A mint is a place where money is made. Our central bank, also known as the Bank of Jamaica, prints our money. Most people who work for organisations are paid on a monthly basis, but sometimes they can be paid weekly or fortnightly.An alternative to working for a company is creating your own business and in turn employing people. You are then called an entrepreneur. If kids have a creative idea to make money, they should discuss it with their parents or guardian or ask for assistance from someone else who may be able to guide them. Starting a business is not always easy and will require a lot of hard work, dedication, the right team and commitment. In fact, many entrepreneurs receive assistance from other people in the same business. Kids are not legally able to earn an income until they are eighteen or over.Did you know that countries earn money too, but on a larger scale? Jamaica and other countries earn income from exports, tourism and taxation to name a few examples. Taxes are compulsory payments made to the Government by individuals and companies.Companies sell their goods and services and based on the funds they earn they invest the funds until it is time to pay staff. Businesses, organisations and people use financial institutions to deposit or withdraw their money. These same institutions get their money from the Bank of Jamaica. Another function of a Central Bank is to regulate the flow of money in a country by working closely with regulated financial institutions such as banks and credit unions. People use money to buy food and other household items, pay utility bills, school fees and medical bills, to name a few.Money is a store of value, unit of account and a medium of exchange for goods and services. When you work and get paid, that is money in exchange for your service. Likewise, when you purchase an item in the supermarket or buy an ice cream cone, your money is exchanged for that item.With modern technology, you do not necessarily have to go to a teller in a financial institution each time you need to deposit or withdraw cash. Automated Teller Machines (ATMs) are specially programmed machines that accept debit and credit cards which are specially programmed cards. These debit and credit cards are provided by a financial institution that you maintain an account with. However, you can only withdraw (debit) funds if you have deposited (credited) money in that account. When you withdraw money from your account using your credit card you are actually borrowing money from the bank and you need to repay those funds within a specific time. Debit and credit cards are also accepted in stores, supermarkets and other businesses. Therefore, kids should know that if you are with your parent or guardian at the ATM the next time, you will know that the machine is not randomly giving away money!One way a parent or guardian may help their children at an early age to save and invest is to start an account with or for your child with a Gift Certificate. It may not be what they would want, but in the long term they will appreciate it when they see their investment growing. Remember, instead of spending money received for birthdays or Christmas, invest these funds and watch your money grow.If you are a parent or a guardian and would like further information on this and related topics, then feel free to attend a presentation on Money Basics for Kids this Thursday at Bookophilia.Deborah Vieira is a Wealth Advisor at Stocks and Securities Limited and can be contacted via dvieira@sslinvest.com.HOUSE RULES
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Financial literacy for kids
