How to Teach Your Kids
Financial literacy is a crucial life skill that can benefit individuals of all ages. By teaching your children sound financial habits early on, you can set them up for a lifetime of financial success. Here are some tips on how to instill the importance of financial literacy in your kids:
Start Early
The earlier you start, the better. Even young children can grasp basic financial concepts like saving and spending. Use everyday activities, like grocery shopping or paying bills, as opportunities to teach them about money. It’s not about making money as the point of life, but of teaching the value of the money and importance of responsibility with the money. This is true regardless of your current wealth status as even adults should be aware that it can change either way and especially due to circumstances out of our control.
Use Age-Appropriate Language
Explain financial concepts in a way that your child can understand. For example, instead of using complex terms like “interest rate,” use simpler phrases like “money you earn on your savings.”
Encourage Saving
Help your child set savings goals, such as for a toy or a vacation. Consider using a piggy bank or a savings account to track their progress. Some techniques are used by parents where they show a child can have an immediate reward, but if they have patience they can accumulate points or dollars for a greater reward down the road. This is a great way to give them a personal experience with saving. You can also have a general rule about money gifts from birthdays and other holidays where a certain percentage is always put into savings.
Teach the Value of Budgeting
Introduce the concept of budgeting by creating a simple budget with your child. Help them understand the importance of allocating money for different expenses, such as saving, spending, and giving. Many were raised by parents who said “We don’t talk about finances”, but it can help a child understand the importance of budgeting by explaining how there are only so many dollars you have at a given point and so you can choose to buy something now but it makes some other better thing unattainable. Or, in more age-appropriate language, a candy bar today may make it harder for the family to budget a trip to Disneyland.
Talk About Earning Money
Discuss ways to earn money, such as allowances, part-time jobs, or entrepreneurial ventures. Encourage your child to develop a strong work ethic and save some earnings. This can also be a great opportunity for you to bond with your child and to bring up stories about your life. Many children many not appreciate the stories at the time, but most people tend to reflect on those moments as they get older as it reminds them of who their parents were when they were younger.
Discuss the Impact of Spending
Help your child understand the consequences of impulsive spending. Teach them to think about whether a purchase is truly necessary and if it aligns with their long-term financial goals. Show examples, once again, about how the treat today means they don’t get the bigger prize down the road.
Set a Positive Example
Children learn by observing their parents’ behavior. Model good financial habits by budgeting, saving, and investing wisely.
By incorporating financial literacy into your child’s education, you can empower them to make informed financial decisions. Remember, it’s never too early to start teaching your kids about money. When a credit union is talking to their members about smarter money choices we are here with our blog to give some insights for those discussions. When the credit union is ready to do the lending, we have the forms for that.
