Financial education is a relatively new term, coined in 1977 by the World Bank. In its simplest form, financial education is about money. It is about making financial decisions based on both wisdom and awareness. In this regard, financial education includes financial management skills, investment choices and learning about investing for wealth creation.
Early childhood development is critical to financial literacy, because it helps children learn about priorities and why certain actions are important. For instance, most parents begin to teach financial education at an early age; however, many children continue to ignore the importance of money and other financial issues throughout their lives. Even though most young children have easy access to monetary tools and information, some are still unaware of how money affects their lives.
Financial literacy and financial education are essential elements of sound personal finance. A strong sense of personal finance starts in the home, with parents establishing a financial literacy plan and teaching financial education through word of mouth and strict budgeting. This early childhood education and modeling of responsible spending practices can help create a foundation for responsible adulthood. As children get older, they must learn about debt, saving for retirement and planning for unexpected events like emergencies, car repairs and medical expenses. At an early age, students begin to understand the importance of budgeting and understanding credit scores, and through stricter financial practices and education they can learn about financial issues like debt and credit cards and how to avoid financial disaster.