The Importance of Teaching Kids Financial Literacy
We all know reading, writing and arithmetic are three essential building blocks of an education. However, it’s also vital to teach your kids financial literacy. Children need to learn how to make informed money decisions to become self-sufficient and contribute to society. Plus, just in case you’re hesitant to talk to your kids about money, remember that financial independence will help prevent them from coming back to live with you after they’ve grown!
Promote Active Instruction
When children are old enough to say they want something, they’re ready to learn about finances. We all form money habits early in life. Don’t force kids to piece together their own conclusions based their limited views — make your instruction intentional. Take advantage of teaching moments when they arise, but don’t turn on information firehose. Financial education isn’t something you can cover in one sitting. It takes time and patience. It’s also important to be positive. Don’t push or lecture. This should be a part of the natural daily discussions you have with your children.
And try to make money real. Show your kids that your Visa® isn’t a magical card full of unlimited funds. Explain how you earn money and discuss how your paycheck is a reward for what you do. And while it’s not a bad thing to explain the finite nature of your checking account, don’t overshare financial concerns. As your kids grow, discuss the difference between needs and wants. Teach them the value of long-term saving versus immediate spending. Give them the opportunity to make financial choices.
Preparation & Planning
Prepare your children for the future by letting them help plan the family budget. Show them how to use tools like Money Manager for setting limits and tracking spending. Let them start by monitoring a discretionary expense. That way, if they make mistakes, it won’t affect your overall plan. Plus, it’s better to have them make mistakes with small amounts when they’re younger than with larger amounts when they’re older.
Opening a youth account at America First, will give your boys and girls a safe place to put their money and save up. They’ll also begin to learn about things like interest and dividends. Additionally, if your children are between the ages of 12 and 17, they can get Fundz cards, which have the convenience and security of Visa without the revolving credit line.
There are also several apps that instruct kids about financial skills. Some teach basic counting and values, whereas others allow users to virtually invest in the stock market. But remember, using an app is only effective if it’s backed up by parental discussion and action.
Practicing Makes Perfect
The grocery store is a great school for basic finances. Start by letting kids help you look for coupons, then find those items on the shelves. As they progress, you can give them your shopping list and challenge them to stay within a certain spending limit. Encourage them to compare prices and look for deals so they come in under budget.
Young kids can learn a lot by running a lemonade stand or candy store for the summer. If you’re having a yard sale, you could put them in charge of the cash box or the mobile credit card swiper. Finally, when they’re of age, encourage your children to get a job. Gainful employment is the best possible way to teach the value of a day’s work. And as they get their first paychecks and you continue your economic conversations, it may surprise you how financially responsible your child can be.