Our educational principles
Children and teenagers come into contact with money early on. So it makes sense to start educating them about finances in their early years.
Why is financial education important?
Whether as the target group of an advertisement or the recipient of an allowance, young people nowadays are exposed to money and consumption at an early age. Learning how to be smart with money enables them to handle their first paycheck properly and not fall into debt when they receive their first tax bill later in life.
What do “financial education” and “financial literacy” mean?
Financially literate children and young people are able to act responsibly with money. This means that they’re not only capable of drawing up a budget for their allowance or Jugendlohn (“youth wage” in English), but they’re also able to budget their money in day-to-day life. We speak of "financial education" when parents actively help their kids learn about money.
How do I teach my child to handle money wisely?
Parents and caregivers are important companions on this journey. You can create an optimum learning environment and use real, meaningful situations from your child’s everyday life. At the same time, the following five parenting behaviors can have a beneficial effect.
Five principles for parents
1. Start on an equal footing
What do you value the most? What’s your view of consumption? If you believe your child doesn’t need five pairs of sneakers, you shouldn’t own too many pairs of shoes yourself either. This makes you credible. Show real interest in your child. Start up a conversation. A child’s family is their closest environment. Be a team that respects, appreciates and supports one another. This creates an ideal atmosphere for learning.
2. Make mistakes – and learn from them
Learn from mistakes. That goes for everything in life and also for handling money. When teaching your child about money, create a relaxed approach to mistakes. Don’t try to prevent every faux pas your child makes. If you think the allowance you give should go towards something more sensible than firecrackers, try to hold yourself back. Perhaps your child will come to realize later that there isn’t enough money left for a bigger purchase. Important: talk about your own mistakes. Surely, you’ve bought something once that ended up being completely useless? Or maybe not?
3. Start with your child’s interests
You learn best when you’re motivated. And we’re motivated when we can apply what we learn to real life. Take this insight and get inspired by your kids. Why? Children often come home with ideas that directly relate to money and consumption. “Everyone in my class has this toy – I want one too!” – use these desires and ideas as your chance to decide on a purchase with your child. The following timeline shows possible teaching opportunities related to money and consumption in your child’s life.
4. Learning means doing it yourself
Watching and listening are key behaviors when you learn. However, it’s also important for your child to take the first steps themselves. When it comes to money, this is even essential. At some point, as far as shopping and saving go, it’s no longer enough for children to simply watch. They should decide on their own what to buy and consume, e.g. with a piggy bank or their first bank account.
5. Raise the bar
In real life, financial advice doesn’t fall from the sky. Try to introduce your child to larger financial matters with simple, easy challenges. How? Perhaps they could save for their favorite magazine first, then later a skateboard and, sometime in the future, a bike. With regard to how they handle money, this will also mean that you’ll be guiding them from short-term to long-term challenges. For example: in the beginning, give your child a weekly allowance, then later a monthly one.
UBS’s educational principles
This article was written in collaboration with educator Marianne Heller, who has years of experience in teaching financial education and debt prevention programs for children and young people.