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(From the Financial Literacy Blog) – When it comes to teaching children about finances, parents regularly focus on budgeting and saving. While those two topics are incredibly important and valuable, introducing kids to the concept of donating can also help them develop into financially savvy adults. However, donating hard-earned money can be difficult to do—especially during these uncertain times. If someone is unable to donate money, donating goods or time is also extremely valuable. Here are a few reasons why philanthropy can improve a child’s financial well-being in both the short and long-term:
Teaches Math and Money Management Skills
When children start donating to charity, they need to become cognizant of their financial standing. If they give too much away, they won’t have any money for themselves. Much like budgeting, philanthropy requires basic math and money management skills. By taking the time to figure out how much is needed to fund their own needs and wants, they learn what portion of their money they can spare for others. Separating their money into different spending categories is a great hands-on lesson on percentages, fractions, and decimals. Without a solid understanding of math and money management, even people in good financial standing can find themselves struggling to pay their bills. Learning these fundamental lessons can help children maintain a healthy financial well-being as they grow older. Plus, when someone knows they’re going to be making a donation, it may motivate them to be more attentive to their own finances to ensure they don’t fall behind or default.
Creates a Sense of Empowerment
In an effort to create a sense of empowerment and promote positive emotional health early on, teach children to give back. The positive effect on their emotional health will directly correlate with their financial health as they grow older. Donating and volunteering can help improve one’s self-esteem, life satisfaction, and overall happiness. With studies showing a direct link between emotional health and financial health, the empowerment felt after giving back can have a positive effect on financial standing. For example, retail therapy is a common coping mechanism when people are feeling down. When upset, making impulse purchases can temporarily improve morale. However, it’s a costly coping mechanism that often strays people away from staying committed to their budget. In an attempt to project an image of success, people may buy expensive clothing, accessories, and other material objects. They then may have trouble focusing in on paying off the debt incurred or staying committed to long-term financial plans.
Helps With College and Job Applications
Along with gaining money management skills and a sense of empowerment, philanthropy can help advance a child’s career. As children start applying to colleges and seeking employment, they’ll likely be filling out applications. In an effort to accept or hire the ideal person, many colleges and employers prompt applicants to list their philanthropic efforts. As charitable giving and voluntarism are not requirements, being able to list these efforts shows that a person has gone above and beyond and may stand out from the rest when applications are reviewed. A college education or being hired at a certain employer can change one’s financial trajectory.
While it may seem counter intuitive to give money away, donating to charity can nurture empathy, instill money management skills, and teach both integrity and social responsibility to children. Helping others simply feels good and if someone can gain valuable and beneficial financial lessons while doing so, that’s a win-win.