Money (Finance) plays the biggest role in our life. We carry out many transactions in our day to day life and knowing about finance or having financial literacy can help us make better decisions in our life.
Usually, the financial lesson starts at home when parents start to give their toddlers money to save in their piggy bank. Even though the concept of money, numbers and saving is not clear, they are put into the habit of saving from childhood.
Financial markets and their lessons are complex, parents should make sure that children get step by step financial lessons as per their age at home, and should choose schools like International School Dubai in order to make them financially literate which could prevent them from investing in the wrong financial instruments later.
What is Financial Literacy for Students?
The understanding of financial literacy or understanding of financial components is learning about skills such as budgeting, saving, investing, retirement planning, taxation, loans and other instruments etc. In short, learning about personal finance management and using the skills or ability to apply those strategies in real life is financial literacy.
What Are the 5 Principles of Financial Literacy?
Earning
The first basic component of financial literacy is earning. Knowing how much we earn, and calculating gross and net income after deductions (certain taxes or employer-sponsored health insurance or a retirement plan benefit) is essential as it will help in the next step i.e spending responsibly with a personal budget.
Spending
Once you know how much you earn and what is your net income, making a personal budget is easy. A personal budget means tracking your spending over 1 month and then breaking it down into categories. It makes us aware of our spending habits, helps to create money-related goals for us and helps us to achieve the same by following the budgeting rule.
Saving
Financial literacy education is important. Everyone knows that it’s important to save money, but people hardly follow them. We know it is not easy to spend less but following certain good money habits from childhood will make the job easier.
Financial experts recommend keeping a 3-month salary or basic living expenses in an emergency fund. An emergency fund will give us peace of mind and help us prevent making wrong financial decisions during a financial setback.
Start saving earlier for a big purchase such as a car, home, etc., which will help you to keep aside less each month.
Planning for Retirement
It is recommended by Financial experts to start saving early for retirement and to keep 10% of your net income every month in retirement savings (401(k), IRA or both)
Paying off Personal Debts.
Saving wisely will help to avoid borrowing but in case it happens in case of a big purchase like a home loan; your good money-saving habits will help to close your borrowing a/c as fast as possible saving you a lot of interest money.
Why is Financial Literacy Important?
From day-to-day expenses to long-term financial goals; financial literacy is important at every stage. Lack of financial literacy will affect your financial decisions like saving, budgeting, opening the right bank accounts, planning for retirement, paying off debts, etc.
Assess Your Financial Literacy
Ask yourself questions that will help you to know more about your financial literacy status.
● Do I know the budget?
● Do I have an emergency fund that will cover at least three months of basic living expenses?
● Do I have a plan for retirement and plan for paying off debts, if any?
● Do I know how to improve my credit score?
If your answer is no to all the questions or some then you need to do certain things to take control of your finances and improve your financial literacy.
1. Create a personal monthly budget as it will lay the foundation for your financial health.
2. Start an emergency fund to save yourself from the unexpected financial burden (layoff or big medical expenses).
3. Make a plan for retirement by setting aside monthly and investing them into a retirement account.
4. Plan to pay off your debts soon by earning extra income and saving on interest
How can financial literacy help you as a student? Explore the benefits of financial literacy for students.
● Able to make better financial decisions in future
● Efficient use of money by proper budgeting
● Able to make plan better plan for paying off debts
● Able to make plans to achieve financial goals
● Reduction of expenses
● Less financial stress
● Able to make good choices in terms of insurance, credit cards, loans and investments
● Students who manage money early in their life are able to handle their finances as an adult.
● They will be able to make better decisions for their careers.
● They will know how to live independently, prepare budgets, for themselves
● They will be able to make better financial choices for everyday living.
● They will learn to manage risks
● They will create plans and be prepared for ‘rainy days’
● They will learn to pay off unmanageable debts and invest in their future goals.
● Financial literacy in schools will empower and equip students with the knowledge, and skills needed to build a more secure future.
● It helps students to become self-sufficient and achieve financial stability
● It helps students to understand between needs and wants
● It makes students smart as they understand the relevance of money in their life
● They understand the difference between good and bad spending habits
● They learn to control unnecessary expenses and learn to invest money in the right instrument.
● Financial Literacy makes students independent as they are able to make decisions for themselves, and understand various money investment instruments.
How Do You Integrate Financial Literacy in the Classroom?
Financial literacy for millennials is the need as there is an increasing amount of debt and a lack of money management among Millennials. There is a need for incorporating financial literacy lessons into the curriculum so that students get the lesson as early as possible.
● Ask students to plan a fundraiser for helping local NGO as it helps students to calculate money received, budget planning, expenses made, etc.
● A workshop should be conducted for parents where teachers can teach parents to incorporate financial lessons at home
● Ask students to write about their first memorable experience with money
● Ask students to write how they will do money planning to accomplish goals in future.
● Another way is to share resources like articles or stories about money with students every day in order to incorporate money reading habits and strategies. Ask them to utilize some of these habits in order to be more money savvy
● Money is all about number games, teaching them how to calculate interest rates, educating them about different currencies and their current rates, how to calculate taxes, etc., are some of the ways to help them understand finances.
● Ask students to research the various options with which they can earn money using their skill sets.
● Various sessions on highlighting the concept of financial health and its importance should be conducted in order to share their correlations and how it can affect other areas of day to day life.
Conclusion
The ability to use knowledge and skills to manage finance effectively is the art every individual should learn for a lifetime of financial well-being. Learning financial literacy is not easy, but slowly step by step you can master it. It will not only ease life’s burdens but will empower you to make good financial choices.
Putting your child in schools like Dubai secondary school will help them to take charge of their finances early as growing up in a challenging world requires many skills that can help them to set them apart from others
