Financial literacy is something that most of us probably were not when we were younger and more than likely not while we were in school. Teaching your kids financial literacy is a valuable life skill that will benefit them throughout their lives but most of us don’t know how to do that. So, here are some quick tips on how to get started:
1. Start Early
Begin teaching financial concepts as soon as your child can understand basic math and money. Kids start talking about money early in life even if they don’t realize it. When they say, “Hey, I want that.” you can start talking about money. You can discuss why you have to pay for it or how much it costs just to give them the idea that it is not free for the taking.
2. Use Real Money
Give your child a small allowance or encourage them to earn money through chores. You don’t have to start off with a large sum of money but just getting them to realize that when you do work, you can earn money. This hands-on experience helps them understand the value of money.
3. Set Savings Goals
Help your child set savings goals, whether it’s for a toy, game, or other item they want. Involve your kids in buying things they want. If your child wants a new doll, let them know how much it costs and let them earn the money to buy it. Discuss how long it might take and what they need to do to earn the money. This teaches the importance of saving for future needs.
4. Teach Budgeting
Talk with your kids about budgeting by having them put their money into three categories: spending, saving, charity. They can then split their money so they can see you just can’t spend all of your money.
5. Open a Savings Account
Opening a savings account for your child is a great way to show them how banks work and how their money will accumulate when they add to it and don’t spend their money. You may see them wanting to save more because they like to see the big numbers. You can talk with them about interest and how it helps your money grow.
6. Use Everyday Situations
Involve your child in everyday financial decisions, such as comparing prices at the grocery store or discussing budgeting for a family vacation. Having your kids involved helps them to see how you as parents make your money decisions. Kids need to see how money decisions are made and how they affect other decisions that are made for the family.
7. Explain Wants vs. Needs
Help your child understand the difference between items they want and items they truly need. If it was up to kids they would buy everything they wanted but they need to know that is not possible. There are things that we want but things that we need and they need to know that the needs must come first. Buying a new pair of shoes because the other ones are too small is a need whereas buying a new pair of shoes because you see a cool pair is a want. You have to make sure you are using your money wisely.
8. Talk About Debt
Talk to your kids about debt. Let them know how credit cards and loans work before they find out on their own. Help them to see the big picture when you use credit cards. Explain to them about how loans, even student loans, can change their lives and how they spend their money in the future. Show them how to use credit cards responsibly so if they do have to use them, they can do it correctly without going into debt.
9. Investment Basics
As they grow older, introduce basic concepts of investing, such as stocks and bonds, and explain how investments can grow over time. These are concepts that can be difficult for us to understand. You can get my course, Investing for Your Kids, to help them see how you are investing for them.
10. Lead by Example
Children learn a lot by observing their parents. Be a good financial role model. Make sure you are using a budget and not living beyond your means. Let your kids see you saving and taking the time to research large purchases. If you feel that you need help in this area, take my free course, FinanciALLI Focused Foundations, to help you get your budget and money together how you want.
11. Financial Literacy Books
Use age-appropriate books and resources to teach financial literacy concepts in an engaging way. There are many books that are out that can help you teach your kids about money. A few titles you can use are….
12. Hands-On Activities
Play games that help teach financial literacy. One we have probably all played is Monopoly. Didn’t we all learn that we need to put some apartments on Park Place in order to make the money? Or even the Game of Life. You found out that the more kids you had, the more money you spent. Any games that can help teach money will help you teach your kids about finances and they might not even realize the important lesson they are receiving.
13. Encourage Entrepreneurship
Support your child’s entrepreneurial endeavors, whether it’s setting up a lemonade stand, selling crafts, or offering services to neighbors. If your kid wants to start a business, help them out and support them. Help them buy the supplies and do the planning to help them make the most of their money. If they don’t do well with their business, help them figure out why and how they can change it for the next time.
14. Charity and Giving
Giving back to the community is a concept that kids need to learn. There are so many good causes to donate to that truly help people. Help your child pick the organization they would like to donate to. Have them think about a cause they would like to give to so that it is meaningful to them and they can see why it is important to donate.
15. Allow Mistakes
Let your child make small financial mistakes, and use these as learning opportunities to discuss consequences and better choices. It is okay if they make mistakes. I am sure we have all made money mistakes. If they are always perfect, they will not understand what to do when they make a mistake. Help them to know it is ok and help them decide how they can do better next time.
16. Regular Check-Ins
Talk about money. Don’t let it be a taboo subject. It seems so many people want to keep money hush, hush but you should talk about it so that your kids understand how you spend and save money. They need to understand that it is important but what you do with your money is even more important.
17. Gradually Increase Responsibility
As your child gets older, gradually increase their financial responsibilities, like managing their own bank account or budgeting for school expenses. Your goal is to help your child gain financial independence. Take the steps while they are younger to help them be able to manage their money when they are older.
Remember that teaching financial literacy is an ongoing process. Be patient, answer questions, and adapt your teaching approach as your child’s understanding of money and financial concepts develops. If you want feel like you need help with your budgeting and financial literacy check out my coaching program, Flourish FinanciALLI.