Children and financial wisdom

Financial literacy or financial wisdom enables smart financial decisions.

In order for children to become financially wise, their parents need to be the same. Having financial wisdom makes it easier to pass this knowledge on to your children.

Financial wisdom can be:

Knowing how to compile a family budget
Having basic knowledge of investing
Responsible behaviour with money

How to teach financial wisdom to children?

The child’s mother, father and loved ones play an important role in shaping their attitudes. Children observe how their family members handle money daily and, as a result, develop a general understanding of money.

Show them how much money is spent on the home, transportation, food, recreational activities and loan obligations. Teach them to compile a shopping list and make reasonable choices when shopping.

The right time for an allowance depends on the maturity of the child and values of the parents. Don’t pay allowance for chores as the child should be responsible for these regardless. However, an allowance could be paid for more difficult tasks.

This helps the child to learn setting goals and saving as well as increases their independence.

Try different options to find the right amount. Start with smaller amounts and allow the child to decide how they want to spend it. Increase it over time to teach the child to save money.

Make a deal with your child regarding expenses they will pay from their own budget and expenses that will be paid from the family’s budget (e.g. clothes, entertainment, phone bill, etc.).

Explain to the child how to set short- and long-term financial goals and compile a plan together to reach these. Talk about how using a loan affects the cost of the purchase and compare this to saving. Talk about how much money is needed to buy a computer, go on a holiday or study in a university as well as how and how long you need to save to make such purchases.

Tell your child that sometimes it is necessary to say no to certain things to reach bigger dreams or goals.

In addition to teaching managing money, a bank card lets the child know their parents trust them. It is also usually safer that carrying cash. An account statement helps the child better understand what they spend their money on. Additionally, you can keep an eye on your child’s finances in the Internet or mobile bank and change their limits, if needed.

A summer or a half-time job is an invaluable experience in getting to know the value of money and helps youngsters in choosing a career.

Praise and give recognition for reasonable use of money and reaching their goals.

Going to university, especially when attending one in another city and living alone for the first time requires financial planning. Even when not paying a tuition fee.

Studies will consume most of the student’s day, making it difficult to have a full-time job. Even though Estonian universities do not generally have a tuition fee, studying comes with significant expenses.

Attending a university does not come with just study-related but also other living expenses, e.g. accommodation, transportation, food, entertainment.

To get a better overview of the student’s expenses, it is advisable to compile an example budget: include the expenses, the student’s income and whether and to what extent their parents support them. More on compiling a budget.

Additional reading on how to manage finances as a student

If your expenses exceed your financial resources, you should focus on finding additional employment even before the semester starts.

Keep an eye on job advertisements using the following pages:

In addition to a half- or a full-time job, short-term employment (e.g. replacement during vacations, helping out during busier days) may also be helpful. Have a look at short-term employment at Goworkabit. Another useful source for finding a job is the phone app MeetFrank. Don’t forget to make a LinkedIn account.

Get practical and valuable tips on supporting a student or financing the study period from the financial wisdom Facebook group #Kogumispäevik and Instagram account @Kogumispäevik.

Jaak Roosaar “Rikkaks saamise õpik”
Kim Kiyosaki “Rich Woman”
Robert Kiyosaki “Second chance”
Seppo Saario “How I Invest in Stock Market”

T. Harv Eker “Secrets of the Millionaire Mind”
Riin Tuttelberg “Tom õpib rahamängu”
Mihkel Truman, Jaak Roosaar “Kuidas saada rahatargaks?”
Read free e-book Financial Alphabet (available only in Estonian)

Children and financial wisdom

Financial literacy or financial wisdom enables smart financial decisions.

How to teach financial wisdom to children?

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