Ideas for Teaching Your Children Financial Literacy
January 25, 2021 | by luke
It’s one thing to understand finances. It’s another to be able to apply financial skills effectively. As a parent, it largely falls to you to teach your child how to handle finances. The question is, what do you teach when? Do you start showing your 3-year-old how compound interest works? Do you wait until you have a teenager to discuss savings and budgets?
Here are a few tips and suggestions for how to effectively teach your children financial literacy before adulthood.
Teaching Young Kids About Money
The first thing that you have to realize is that financial literacy doesn’t take place at one specific stage in childhood. It takes time and a gradual compiling of knowledge and skills. With that said, here are a few ideas to help your child begin their financial journey:
- Start with their learning style: A child’s learning style is ground zero for financial literacy. Consider if they are a visual, auditory, or kinesthetic learner. Then look for financially focused resources that speak to that particular learning style.
- Don’t get too ambitious: Remember, this is the stage to focus on things like recognizing what money looks like, the value of each kind of bill or coin, and so on. Don’t rush the process.
- Watch videos: YouTube is full of different videos that can help expose your child to basic money matters. Just make sure to vet each video beforehand.
- Use games: Gamification is a great way to teach financial literacy. Play grocery store or restaurant and begin to associate these activities with basic financial transactions.
Teaching School-Age Children About Money
Once your kid begins school, it’s time to up the ante a bit. This is the stage where you can start to expose them to things like budgeting, earning, spending, debt, saving, and giving. There are many ways that you can do this in a safe space that avoids making them feel overwhelmed:
- Give them an allowance: Even if you’re not naturally an “allowance” family, it may be a good idea to give your child a small recurring amount of money at this point. This can help them learn to budget, save, tithe, and so on.
- Take them shopping with you: Grocery shopping is a natural setting where monetary transactions take place. Take the time to talk through your decisions with your child and answer any questions they may have.
- Hone their arithmetic: It may seem tangential, but a sound grasp of basic arithmetic will make financial lessons much easier for your children as they grow. Get some flashcards, download a kid-friendly app, and help them with their math homework, all in the name of their financial future.
Teaching Teenagers About Money
Often the most daunting stage of teaching financial literacy comes in the teenage years. At this point, you’re dealing with a young adult that is preparing to branch out on their own. There is a sense of urgency and responsibility. Combine this with a natural ramping up of the complexity of the financial lessons at stake, and the entire thing can feel completely overwhelming. Fortunately, there are several activities that you can lean on to help make the process smoother:
- Capitalize on life lessons: At this point, life will often serve up ideal situations that can facilitate developing financial skills. Things like saving for a PlayStation, buying their first car, and even moving out can double up as valuable monetary lessons. They can help set the stage for the countless adult decisions that lie just around the corner.
- Use tech: Many kid-friendly money apps can help you provide a monitored sense of responsibility for your teen. For instance, some apps allow you to transfer funds to your teen and then track how they spend it. Others help them maintain their own budget. These are great ways to allow them to learn without leaving them on their own.
- Get a credit card: Cosigning on a credit card should be done very carefully and with a small limit. Nevertheless, as your teen gets older, it’s a good idea to begin teaching them about how to handle credit and debt. This can also give them a payment history and begin to build their credit for the future.
Playing the Long Game
Teaching children about financial literacy shouldn’t be about short-term goals, accumulating facts, or passing tests. It’s a long-term play that takes into account both knowledge and the application of that knowledge.
This requires more than simply teaching the value of money. It must also include nitty-gritty life lessons. Young children must witness financial interactions. Kids in elementary and middle school should become familiar with what it takes to maintain a budget and save money. Teenagers should learn to handle things like credit, debt, and balancing a checkbook. All of these should be hands-on activities whenever possible. They shouldn’t just remain on paper or in theory.
If you can gradually introduce money concepts to your child as they grow, you’ll be able to equip them with the best financial education possible — which is something money simply can’t buy.
Luke Smith is a writer and researcher turned blogger. Since finishing college he is trying his hand at being a freelance writer. He enjoys writing on a variety of topics but home and family topics are his favorite. When he isn't writing you can find him traveling, hiking, or gaming.
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