The annual survey conducted by SEB banka in Latvia shows a positive trend that young adults start saving earlier and earlier, i.e. almost half of young adults start saving while they are in secondary school or earlier. And their numbers are increasing. Financial literacy is much more than just saving money, however. It encompasses a range of financial skills and an understanding that helps make sustainable financial decisions in daily life. In short, it is the ability to understand the value of money and spend it wisely.
Since not all children are equally capable of learning sustainable financial management at home, it is the responsibility of educational institutions to teach basic skills. However, parents are the best teachers and the first role models for children in handling money.
Don't be afraid to talk about money
Everyone must decide for themselves when to introduce their children to the topic of money and start developing their personal financial literacy, but the golden rule is that money should not be taboo in the family and children should understand from an early age why they need it and how to handle it properly.
The first introduction to money can take the form of a game at preschool age. For example, when your child begins to recognise numbers and can count, you can use money - real or toy - as a teaching tool.
Do not be afraid to talk to your children about money - show them the prices when you go shopping and talk about the prices of food, everyday items, and toys. Offer to compare prices with your children so they understand the relative value of money.
With older children, you can talk about other living expenses, such as the cost of various services or interest-clubs, the mortgage on your home, or planned family vacations. And if you like board games, Monopoly or similar games can also be a valuable source of financial education.
Personal card for greater motivation
Practice makes perfect, and kids can get this experience from their pocket money. There are several tips on when, how often and how much money to give children. It also depends on the family's financial circumstances.
A child can get his first money as soon as he learns to count. Of course, it should not be a large amount. It can be linked to the child's age, for example, the child then receives half of the euro amount per week corresponding to his or her age.
The money can initially be given in cash, but when the child starts school, the money can be transferred to the child's card account. By introducing a new means of payment, the child will feel more grown up. And when he sees mom and dad paying with the card at the shop, he will want to do the same.
Remember that children are watching you and learning from you, so it is important to set a good example. It might be a good idea to work with your child to save money for a major purchase - a new phone, TV, or something else they want.
In Latvia, children as young as 7can have a personal account and a payment card linked to it, and each year more and more families take advantage of this option. Cards are also increasingly accepted in schools and are a common way to pay for lunch, which is more convenient and safer not only for children but also for parents.
According to SEB, the first payment card for children in Latvia is most often issued at the age of 12. In Estonia, children receive their first card earlier - on average at the age of 10 - and in Lithuania later - at the age of 14. Across the Baltics, children's purchases are relatively low - around 70% of children spend less than 50 EUR per month. New customers in Latvia pay for an average of six purchases per month with the card, and the average purchase is just over 6 EUR.
Help but don't instruct
Internet bank or the SEB mobile app is a very good practical tool for teaching children financial literacy, and paying with a card allows children to manage their money independently, for example, by checking their account balance after paying for a purchase and assessing how much money they have already spent that month and on what. The card reduces the risk of losing money or forgetting to pick up change at the shop, and parents can transfer pocket money to their child quickly and free of charge at any time.
Transaction statements are another benefit of online or mobile banking. After agreeing with your child how much of his or her income he or she wants to spend on daily needs and how much he or she wants to save, you can discuss together after a month or other agreed-upon period how the plan was adhered to, which expenses were unnecessary, and how much he or she could have saved if not for.
However, the analysis of a child's personal resources should always be done with his or her consent, and avoid criticising him or her and, above all, blaming him or her for the choices he or she makes. With pocket money, your child learns to plan his savings and expenses, so parents should trust him and allow him to use his money as he pleases. Children must also be allowed to make mistakes, because only when they make decisions on their own and face the consequences will they learn to manage and plan their finances. If the child can not help but buy another candy or toy, he will find that by doing so he has extended the time he needs to save for a coveted phone or other valuable purchase.
Elīna Kalniņa
Head of Private customer segment at SEB
