4/8/2024 - Economy and Finance

The importance of financial education for decision making

By Paula Spitaleri

The importance of financial education for decision making

Global Money Week is an event promoted by international organizations, which will take place from March 18 to 24, with the aim of promoting knowledge about money management, especially focused on young people. This year's theme is "Protect your money, secure your future" and, for this, financial education is fundamental.

The relationship with money has changed over time. Today, children have great tools to manage their income and expenses, they have virtual wallets that allow them to make financial decisions in their daily lives and to access different types of operations with their funds.

Adolescence and youth are key and ideal times to acquire healthy financial habits, which allow them to build a solid foundation so that when they have their own income, they have the necessary knowledge to face each decision in an intelligent way, using money and the different ways to manage it in their favor.

But how do we teach children about money management? Let's look at some tips:

- Give them money for a period instead of every time they ask for it. If they are younger, we can give them a week's amount, as they get older, we can give them a month's money.

- Suggest that they set savings goals: let them know what they want to buy, from a video game to a bicycle or a vacation with friends, and help them plan the way to get there.

- Download an app for them to track their spending and income so they can find opportunities to save.

- Have them make budgets to plan spending for the following periods, allowing for a margin for savings and contingencies, and then analyze whether or not they met the budget and why.

- Show the children different alternatives so that they can manage their savings and invest them.

This last point is where we stop, to understand the importance of starting to invest at the very moment we have our first savings. This is where the concept of "compounding" or "compound interest" comes into play: the sooner we start investing, the sooner we produce interest that we can then reinvest.

It is not necessary to have a large capital to start investing, with what we have, we can start to produce a profit and reinvest it to generate new interest, which will be calculated on a larger and larger capital.

Time is on your side: the longer we have the money invested, the more our capital will grow, and the faster we will reach the goals we set out to achieve with our income.

Intelligently managing our liquidity is also a way to find savings opportunities, using the tools of the market to our advantage. For example, investing in a fund that gives us positive returns every day in small percentages and that we can withdraw immediately to cover our regular expenses. The interest we generate can be part of our savings.

Learning how to manage money, knowing our income and expenses, and starting to use the tools at hand to make a more efficient use of liquidity, are some key points that will help us lay the foundations for a more solid future.

At Balanz we are committed to financial education. By holding workshops in schools and signing agreements with universities, we bring practical knowledge about finance and investments to students of different ages and academic disciplines so that they can then apply it professionally, but also in their personal lives. In addition, through our virtual campus, we democratize access to financial knowledge, equipping new generations with the necessary tools to make intelligent economic decisions.

We firmly believe that a comprehensive financial education is essential for the development of informed and responsible individuals, capable of contributing to their own well-being and that of society as a whole.

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Paula Spitaleri

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