Economy, Domestic Economy

Children and Financial Literacy

Children and Financial LiteracyChildren and Financial Literacy

When I was a kid, I often wondered where money came from and why didn’t everyone have enough of it to buy all the chocolate and ice cream in the world (or even better, build a chocolate house!). I first learned about the value of money when my father told me of his debts to people, (which I later learned was because his audio/video repair shop was robbed, twice). I had no clue what debt meant by then and even when my father explained that it meant he owed people their money, I still wondered why people had trusted him with their money in the first place. But as I needed my dad to have enough money for the chocolate house, I decided right then to earn money, somehow, to help him pay off his debts. I was 5 years old.

Over the years many theories have been put forth by social science experts regarding the methods of teaching fundamental economic concepts to children. While some believe in the academic approach towards teaching economy in early childhood stages, such as in pre-school or elementary levels, others suggest the use of daily-life classroom events that are either directly or indirectly relevant to economics, as a basis for further discussion and explanation (similar to what my father did). Vast research and experiments have been conducted on both theories, both with successful and unsuccessful results.  But what both groups are unanimous about is that teaching economic concepts should start early in childhood.

But what exactly should children be taught about the economy? Do they need to understand the meaning of economic terms such as saving, investment and inflation? Most experts disagree. They believe what is more crucial in children’s education is to nurture  in them a set of economic attitudes and behaviors, such as efficient use of energy, respecting people’s ownership rights and cooperation, which would help both individuals and the society as a whole.  

  Why Important?

Apart from teaching children the value of money and providing them with fundamental skills to manage their personal finances as they grow up, a much bigger goal could be achieved by teaching them the right economical attitude in early stages of their life, hence educating a generation of financially conscious people who not only know when and where to invest their money, but also understand the value of scarce natural resources.

Wasteful use of resources is responsible for many environmental crises in the world, and our country is no exception. The Iranians’ wasteful consumption of electricity, fuel, water and gas has raised the alarm by authorities and experts on many occasions, warning that if the same consumption patterns continue, the country will soon be faced with a critical shortage of these resources. Wouldn’t it be more effective if the efficient use of energy were embedded in the nation’s mind (consciously or unconsciously) through a well-designed education system rather than by raising the alarm when the resources have depleted to critical points?

Meanwhile, economists estimate that oil reserves will run out in about 30-40 years. There is an ongoing debate between ‘peak oil’ theorists, who believe that we have already passed the point of maximum production, and oil companies who state that new technologies will extend the life of oil wells beyond estimates. What is clear is that oil reserves are going to deplete sooner or later. This is of particular importance for a country such as Iran which relies on oil for a significant share of its economy – an economy which must be managed by the future generation without the luxury of easy oil income.

Another economic impact of people’s behavior pattern can be observed in the volatilities that arise in markets, such as the currency, gold, housing, etc., that sometimes lead to financial crises and economic bubbles. Experts believe deep-rooted cultural factors are to some extent responsible for the unpredictability and fluctuations in the economic environment, highlighting once more the importance of raising financial awareness among the masses.

  Improving Children’s Economic Ways

Having realized the importance of early-life economic education for children, a number of games, magazines, mobile applications, etc. have sought to provide children with basic economic lessons and teachthem the required life skills.

Amir La’li, a PhD student in economics, launched a monthly magazine in July last year called Qollak (piggy bank) to teach children aged between 3-7 basic lessons for a better economic life. The magazine aims at teaching economic skills to children indirectly, using stories, rhymes, games and pictures. A team of specialists comprised of child psychologists and children literature experts supervise the magazine’s contents and graphics to ensure that the right message is getting through.

As La’li explains, in an interview with Tejarat-e-Farda economic weekly, the magazine is not just for 3-7 year olds. As this age group is incapable of reading on their own and requires a teacher or parent to read the stories to them, it targets a larger audience, teaching the adults how to treat their children in day-to-day life. Also Qollak plans to launch similar magazines for other age groups in the near future.

  Governments & Economic Literacy

Governments around the world have initiated programs and strategies aimed at improving financial literacy, which refers to the set of skills and knowledge that allows an individual to make wise and effective decisions on their financial resources.

The Organization for Economic Co-operation and Development (OECD) started an inter-governmental project in 2003 with the objective of providing ways to improve financial education and literacy standards through the development of common financial literacy principles. In March 2008, the OECD launched the International Gateway for Financial Education, which aims to serve as a clearinghouse for financial education programs, information and research worldwide.

The Program for International Student Assessment (PISA) is a collaborative effort among OECD member countries to assess the skills and knowledge of 15-year-old students around the world. The assessment has been held every 3 years since 2000. The PISA added financial literacy as an additional domain for the 2015 assessment, which will be held across 70 countries and regions across the world.

Iran’s education system has often been criticized for failing to upgrade  to new advanced theories and concepts. Many assessment programs are held across the world to help countries understand where their education system is heeded in terms of quality and effectiveness. Iran has not participated in any of these assessments so far.

Realizing the importance of improving financial literacy in general, and the children’s in particular, the government could take initiatives to implement similar programs and participate in global assessment schemes such as PISA to help the country move forward and  improve the education system.