Raising Money Smart Kids: Four Tips for Teaching Financial Literacy
Introducing age appropriate financial concepts is critical to raising money smart kids and encouraging responsible habits. Financial literacy is an important life skill that affects almost every decision we make. Simple, yet valuable concepts, like budgeting, saving, investing, purposeful spending and opportunity costs taught at an early age can pay dividends for your children in adulthood.
In honor of April being Financial Literacy Month, we’ve put together four tips to help parents teach smart money habits:
It’s never too early to begin teaching your kids the right money management habits. Like anyone any of us, it’s harder to break habits or begin new ones as we get older. Begin having conversations with your kids at a young age about family finances, budgeting, saving, spending, etc. This will ensure a genuine foundation to carry them into adulthood.
Use Allowance as a Teaching Tool
A great lesson for kids to learn: money is not free! Teach them about earning money and work ethic by giving kids an allowance for fulfilling household tasks. Use this money to explain how to manage, save, budget and spend wisely. They’re more likely to make smarter decisions when they have ownership – and consequences! Encourage them to set up a plan for spending and saving. When they’re a bit older, teach them about savings accounts, buy opening a custodial account in their name.
Make the Lesson Practical
Good habits are rooted in managing wants versus needs. Make financial education practical and something your kids are invested in. For example: Sarah wants the newest smart phone. Use that want to teach her about financial literacy. In order to get the new phone Sarah will need to earn money around the house and save. This will also give you the means to teach her about taxes, contracts and monthly fees.
Have Fun with It!
Use games, incentives or interactive tools to make financial literacy fun. There are tons of online games, worksheets and even apps available for kids at all age levels. Implement a savings report card to track their progress or even play a game of Life or Monopoly to learn basic money skills. Making financial literacy fun will increase your child’s retention and participation, and create an enjoyable family activity!
Use or tweak these tips to develop a financial literacy lesson that works your family. The key is start early and be proactive in discussing this important topic. Creating a positive learning experience early is critical in developing good behaviors and future success.