Parenting certainly comes with a host of responsibilities. Not only do you need to keep them happy and healthy, but you also need to make sure that they are getting a great education. One important teaching moment parents often forget is on finances. Learning about money can start as early as preschool, and these lessons last a lifetime. Keep reading to learn how to teach financial literacy for kids.
How to Teach Financial Literacy for Kids
If you want your kids to be financially independent when they grow up and stay away from the terrible trap of debt, it is a good idea to teach money management skill-set to your kids early in life. Check out some crucial financial literacy lessons from experts that you should strive to teach your kids.
Lesson # 1: Money is Valuable, Appreciate It
Things are always valuable when they are in short supply. Think in terms of rare paintings, tanzanite gemstones, watches, antiques, or limited-edition exclusive sports cars, these are all in short supply; hence, the exclusivity and the value attached to them.
No matter how concerned you are about giving your children the very best in life, it is a good idea to make them realize right from the beginning that money is something valuable which cannot be achieved quickly. It is best to abstain from giving them some additional money if they have used up all their pocket money. That way they learn how to spend responsibly.
Lesson # 2: It Is Their Responsibility to Manage Their Own Pocket Money
It is essential to teach your kids to manage everything within their limited resources and to save money if they wish to lead a financially secure and stable life in the future. This step helps them to have a solid foundation early in life that prepares them mentally about being cautious and prudent about all financial dealings.
As per www.socialmoms.com, kids should be encouraged to use their pocket money early. They should understand the real value or worth of a dollar right from a tender age. Once your kid is old enough to realize that she needs money for buying things and when she can understand that money is exhaustible and not infinite, she is old enough to earn or get pocket money for learning valuable money lessons first hand.
Children should also be taught that managing the pocket money given to them is their responsibility. You must continuously encourage your kids to keep aside a small amount as savings from their pocket money. Remember to reward them appropriately when they are consistent and sincere in their saving endeavors and habits. They must be taught to differentiate between a need and a want.
Learning with Real Money
If your kids are getting a weekly allowance, remind them that it is their responsibility to have enough money for their needs until the weekend. If they run out of their pocket money middle of the week they should be mentally prepared to suffer the consequences. This financial literacy for kids lesson helps them to learn to spend within their limited means when they are adults and have started working.
You could rest assured that they would be spending judiciously, staying away from overwhelming credit card debts, and would be having an emergency fund for the rainy day. However, in the case of young adults, you could help them by reviewing checking account options and then actually opening an account. They should religiously deposit whatever they save every month.
Children must learn about debts and their consequences. They must understand the various debt relief measures including taking out a debt consolidation loan and its implications.
Lesson # 3: Importance of Delayed Gratification
Teaching your kids about finance is more about teaching them values that should place them strategically on the road to success. Discipline and impulse control are supposed to be two of the best attributes your kids could teach. They do not have to sacrifice all their wants and desires. Instead, they could enjoy some of these indulgences sometimes. They could wait until there are enough savings to make a more significant buy.
Lesson # 4: Inflation & Interest Are Important Financial Concepts to Learn Early
Once your kid is managing well and spending his pocket money judiciously, you could start exposing him to the essential financial concepts such as inflation and interest. Enlighten them about what a bowl of noodles used to cost people in your generation and how prices have gone up. Make them see clearly how $X sum of money could be used then and how its value has come down now. Teach your kids how to focus on investing in growing their wealth and adequately safeguard against inflation.
The Right Time for Instilling Money Lessons
Kindergarten or Pre-school: Introduce the Basic Concept of Money
When your children are hardly beyond their toddler years, it is necessary to start introducing the basic concepts. When your child is about four years of age, you could tell her what money is and how it is used. Research has revealed that kids could understand the concept of exchanging goods for cash; however, they are not old enough to understand different forms of money.
Elementary School: Now Is the Time to Learn About Earning Money and Even Saving
When your children are about eight years old, generally, they understand that people need to work for earning money. You could start teaching ways to make money. One of the most frequently used techniques to teach financial literacy for kids is to encourage them to do their chores if they wish to earn some pocket money. Motivate them to keep aside a small amount every month as savings. Also, they should be taught to identify their savings goals.
Middle School: Time to Open Your Kid’s First Bank Account
By the time your children are old enough to go to middle school, you could introduce slightly advanced financial concepts. They are old enough to put in a little more hard work and time to do their chores, so they earn more. Equipped with slightly more knowledge about money and with definitely more pocket money you know that your kid is all set for having a bank account. Once you help them open their bank account, you must carry on helping them with;
- Checking their balance online.
- Using their debit cards and learning about the dangers associated with overdraft fees.
- They are learning how their balance would be growing through interest.
High School: Teach Budgeting & Dangers of Debts
These are generally, the last few years you get to spend with your children before they are on their own. This final step toward getting ready and financially educated to face ‘the real world’ is vital. They must learn the two core financial concepts such as budget and debts. Challenge them to determine their savings aspirations and goals. Make the entire process a fun-filled learning experience.
Financial Literacy for Kids
We have discussed some valuable financial lessons to teach your children. It’s not about teaching them to be rich, but about making your kid’s money savvy and building confidence in them. You could help your children learn effective ways of managing their money so that they could appreciate the importance of living within their means.