For nearly half a century, Indonesia has celebrated National Children’s Day every year on July 23. This occasion serves as a reminder that children are not only the nation’s successors, but also future leaders of their own lives.
For this reason, every child deserves to be equipped with essential life skills. Not only through formal education, but also through practical skills they will need in everyday life—one of which is financial literacy from an early age. Since this subject is still not widely taught in schools, the role of parents becomes crucial in introducing it at home. How can this be done? Find the answers here.
Understanding Financial Literacy for Children
According to Investopedia, financial literacy is the ability to understand and manage money wisely—from saving and distinguishing between needs and wants to making sound financial decisions. Although it may sound like an adult responsibility, this skill is actually important to introduce to children from an early age.
Children who are introduced to financial concepts from an early age tend to grow up more confident and are less likely to develop consumptive habits as adults. They learn that money does not come easily and that every financial decision carries consequences.
More than just numbers, financial literacy is a life skill that shapes children into wiser, more independent individuals who are better prepared to face real-world risks.
5 Financial Literacy Principles Children Need to Learn
To help children truly understand how money works, they need to be introduced to the basic principles of financial management. Below are five key financial literacy principles that you can use as a guide:
1. Earning
Children need to understand that money doesn’t grow on trees—it is earned through effort. You can start by introducing the concept of rewards, such as giving extra allowance for helping with household chores. This teaches them that effort is required to earn money. The more they understand the process, the more they will value the money they have.
2. Saving and Investing
Children need to learn that setting aside part of their money for the future is an important habit. Teach them to delay immediate desires in order to afford something more meaningful later. For older children, you can introduce interest-bearing savings products. This helps develop a long-term mindset and patience in managing wants.
3. Borrowing and Managing Debt
Even though it’s not yet time for children to deal with debt, they can be taught about the consequences of borrowing. For example, if they borrow money to buy a toy, their allowance could be deducted until it’s repaid. In this way, children learn about responsibility and the importance of assessing their ability before taking on debt. It also helps them become more careful in making financial decisions.
4. Spending and Planning
Children need to understand that every spending decision should be thoughtful, not impulsive. Encourage them to think before making a purchase—whether it is truly needed or just a fleeting desire. This is important so they can distinguish between wants and needs.
5. Protecting Assets
Although this concept may sound complex, children can be taught to take care of their belongings to prevent them from getting damaged or lost. This is an early step in understanding the importance of preserving the value of what they own. Later on, children will also learn about financial security, such as having an emergency fund or insurance.
How to Teach Financial Literacy to Children
Taking advantage of National Children’s Day, you can encourage children not only to understand financial concepts but also to learn through hands-on experiences, helping them truly internalize the value of money. Here are some practical ways that can be applied in daily life:
1. Introduce the Value of Money Early
Children need to understand that money doesn’t appear out of nowhere—it must be earned. Providing a regular allowance can be a good start, especially if part of it is given as a reward for completing certain household chores.
This teaches the connection between effort, responsibility, and reward. Children will also learn that spending money they earned themselves feels different from spending money given to them.
2. Money Doesn’t Have to Be Spent Immediately
Teach children that money is not just for spending, but can also be saved or invested. This trains them to delay gratification for more meaningful goals. This habit also lays the foundation for long-term thinking in managing finances.
3. Create a Special Savings Book for Children
Open a children’s savings account or create a “manual savings book” as practice. This helps children get to know financial products in a tangible way, not just as a concept. They can record their allowance income and daily expenses themselves. In addition to fostering discipline, this also cultivates the habit of responsibly monitoring their finances.
4. Introduce the Meaning of Sharing
Encourage children to set aside a portion of their money to help others, whether through charity boxes, donations, or small social initiatives. This nurtures empathy and social awareness from an early age. In this way, children learn that money is not just for themselves, but can also be a tool for doing good.
5. Help Children Create a Spending Plan
Encourage children to create a small budget, for example, to buy a toy or a birthday gift for a friend. This develops basic logical thinking and teaches that financial planning is important. The more they practice, the more skilled they become at managing their own money.
6. Encourage Children to Try a Local Version of a ‘Summer Job’
For older children, provide opportunities to engage in money-earning activities, such as selling cookies, helping with a family business, or “interning” during school holidays. This experience offers hands-on lessons about effort, income, and the challenges of earning money. In addition to developing entrepreneurial skills, children learn that money has greater value when earned through hard work.
7. Libatkan Anak dalam Keuangan Usaha Kecil di Rumah
If you run a home-based business or SME, involve children in simple processes such as recording sales, packing goods, or assisting with promotions. This not only introduces them to the business world but also provides a valuable opportunity to learn financial literacy in a contextual, hands-on way.
Through this approach, children can see firsthand how money circulates and how profits and losses occur. This further reinforces their understanding that money needs to be managed wisely.
To set a good example, as a parent, you should also demonstrate the ability to manage business finances neatly and transparently.
For example, by utilizing professional business management applications such as Labamu. Not only practical, the results are accurate so that they can be used as a reference for making wise financial decisions. Let’s download the app on Google Play or App Store!
