Five reasons to study financial literacy at school

Being financially literate is the prerogative not only of graduates of economic universities but also of current students. Why study financial literacy at school, know how to keep track of money in elementary school, and make savings? We ask Vyacheslav Zrazhevsky, a teacher of financial literacy at CISC_Kyiv, a certified trainer of the Academy of Innovative Development of Education, and the speaker of the School Angels Ukraine project.

What is financial security, and why is it important?

You can often hear from children: ‘’my parents have such a salary, such a car, such a phone.’’ Children need to understand what financial information is confidential, to whom it can be disclosed and under what conditions. 

In practical lessons, I saw how children get excited when they try to insert the card into the ATM, and they don’t even think about closing the panel by hand when dialing the PIN code. Of course, our children are our love, but they are also of great interest to fraudsters, and they need to be protected from the latter.

It is very nice when, after financial literacy classes, parents write messages with words of gratitude that their child in the supermarket, when paying at the checkout, carefully looks at the card, and not on the rack with sweets. 

We learn to save money, keep track of money, and open virtual deposit accounts.

Children do not understand the real value of money, as they do not yet receive a salary. So you should show them alternative opportunities that will open up when saving money. 

• Only a small practical task — saving money for a week — can demonstrate investment opportunities or more efficient purchases. To do this, you can keep a financial diary.

Saving money over some time for investment — for adults, it seems a straightforward task, and for children, it is surprising. Mostly when the complex word investment is replaced by the phrase ‘’sell your money.’’ You can simply gather information about the amount of money in children’s treasuries in one lesson, and ask how much their savings have increased or decrease in the next lesson. Students will understand the importance of keeping track of money when they cannot answer questions about their savings growth.

Once my younger CISC students and I were accumulating coins for a week, we noticed that they amounted to a considerable amount of money seven days later. The children immediately wanted to open deposit accounts to increase these funds by the school fair.

We consider school models of micro-businesses, calculate profits, and learn to distribute earned money. 

This is an excellent opportunity to try yourself in business people’s role — to plan the purchase of products, calculate the delicacy cost, if it is fair, to think about a better place to sell, advertising.

The fair is a model of micro-business. It is perfect for leaving some money earned by children at their disposal. In this way, the child will be able to learn and use in practice all the knowledge gained from the course of financial literacy: from the principle of distribution of savings and ending with cost planning and keeping a financial diary.

For example, some students studying the basics of financial literacy in the second year and already have their small businesses can calculate their cost. Students also clearly understand what part of the income is returned to the business, which is invested in development, and what profit can be spent on gifts to parents (investors should be thanked).

We measure the effectiveness of such a method of investment as a deposit.

The child cannot assess all the financial risks at once; he/she makes decisions based on where he/ she sees more significant benefits. Therefore, it is essential to teach children to assess risks and demonstrate that investments are always objective.

For example, when we determine that a straightforward and effective way to invest is a bank deposit, then after the information that the state guarantees a refund in the event of bankruptcy, children calmly choose the hryvnia deposit as the option’s highest interest rates.

When we talk about inflation, children’s attention shifts to a deposit in foreign currency. And when we see a graph of gold’s real value growth, everyone immediately wants to buy gold and invest it in a deposit. But the fact that the Deposit Guarantee Fund of individuals does not guarantee the return of funds from the deposit in precious metals in the event of bankruptcy of the bank they already forget.

Why it is essential to teach children financial discipline and independence

During lessons, children should be taught to be independent.

It is unnecessary to repeat the task several times or look for opportunities to complete it for children. It is unnecessary to wait for 2-3 lessons while the child ‘’will deliver’’ when the task is not executed. You will be surprised, but students quickly understand the true meaning of the phrase ‘’Have no piece of paper? And the pen?’’ Please resolve this issue on your own.’’ It immerses them in real life.

The child has to quickly make independent decisions and start thinking about the task’s content and finding ways to perform it. Such education in the classroom will help the child in the future to make independent decisions with finances because such choices are always the most difficult.

In the senior classes, we start with a piece of paper or a pen, and in a few months, teenagers make their own decisions about the format of their work, the depth of the task.

For example, last school year, in the fifth grade, the best student was the one who calculated the payback period in the task of budgeting to start a business. However, this was the topic of the next lesson. When I asked why she did that, she said it was vital for her to decide to invest in a new business. And she is just 11 years old!