Recently, the Philippine Department of Education (DepEd) finally added financial literacy to our basic education curriculum. This means that it will be mandatory for schools to teach financial literacy programs to their students specifically financial management and investments. This is actually a very good move by DepEd because financial literacy was never taught at school ever since.
Over the years we didn’t have a proper education when it comes to managing our finances, we get our financial knowledge from our parents and from our experiences, which are pretty much either good or bad. So if you have parents who have bad financial behaviors, then most likely you can end up like them or the opposite if your parents really have good financial behaviors and they’ve successfully pass those values to you.
Another media of having financial education is through experiences. Bad experiences with money leads to fear or learning. Example is investing, their are scams out there and there are lots of it. If you happen to invest in one of them then that will be a bad experience for you when it comes to investments and because of that experience you now fear ‘investments’ because your experience gave you the impression that ‘investments’ are most likely scams or you may have treated it as a learning phase in your life where you took the bad experience for you to learn more about investments and be careful the next time.
If you have read my story , I got my financial education through experiences and I am thankful that I have experienced those at an early age. Starting early will always be an advantage for everyone, thus the saying ‘the early bird gets the worm’. Having financial literacy at an early age has a lot of advantages and I couldn’t enumerate all of them but in this article I would like to share to you what are the most important advantages (in my perspective) when you have financial education at an early age.
1. Developing good financial behaviors early
Financial literacy is just the first step, it doesn’t mean that if someone is financially literate then he/she would be good in handling his/her finances. Being financially literate is just the first step to financial freedom and your financial behaviors are the ones responsible to take you there. Success in personal finance is not black and white, it is a dynamic and a behavioral thing.
Starting early with financial literacy will give you awareness how money works and how it affects your life, knowing that early on will give you the advantage to develop your financial behaviors on how you will react effectively in different circumstances where money is involved.
Lets have overspending as an example. Financial literacy will teach you how to budget money, to allocate every peso of your income. After comparing your budget list to your actual expenses, you found out that you are overspending, financial literacy made you aware of that and the reason behind is because you spend too much on Uber, your behavior towards the comfort of your transport is the one hindering you to stay within your budget and because of that you started to lessen the use of Uber. Months after months you started noticing that Uber isn’t much that appealing to you because your behavior towards it already have changed and made you financially better.
2. Developing long-term thinking
Financial literacy teaches the time value of money, it will teach you to project values of your money in the future so you can make better decisions in handling them. Having this on an early age helps you vision out your financial goals in life and these financial goals in life will develop you to think long-term.
Having a ‘long-term’ thinking at an early age will make you become a great decision-maker in your life, on a financial perspective, it will help you utilize your income and it will also help you decide better on which financial products and services will best suit you that will help you achieve your financial goals and protect yourself with uncertainties of life,
Long-term thinking will not only help you in your finances but also in different areas of your life like health, relationships, career, and etc.
3. Developing planning skills
Planning our finances is tough because ‘Life’ happens. Over time, our interests will change, our responsibilities will change and the way we spend our money will also change. Having financial literacy will teach you life cycles and at an early age it will help you develop your planning skills so that when ‘life’ happens to you, you will be more prepared and ready for the challenges of life.
4. Developing discipline early
Having discipline in handling our finances is tough because like what I said earlier, personal finance is a behavioral thing and the challenge is to be consistent and disciplined. When financial planning takes place, it doesn’t stop in there, execution of the financial plan is also a major key for us to be successful in our personal finance to experience financial freedom.
Executing a financial plan has a lot of needed discipline for it to be successful. It takes discipline to stay within a budget, it takes discipline to stay invested when the markets are crashing, it takes discipline to stay away from too much credit card usage, it takes discipline to save money for your emergency fund, and etc.
Having financial literacy at an early age will help you develop your discipline towards your finances so that you will have more chances of becoming successful in the future.
Having said these advantages, I encouraged you to be financially literate as early as possible because it takes time to develop a great character towards money you will need time to develop those so that you will be successful in your personal finance, it will also help you avoid a lot of financial mistakes over your lifetime.
*This article was first published at The Manila Times
Photo Credits : Richard Messenger