Raising financially literate children is an important goal for many parents. It’s important to help kids understand the value of money and the importance of saving, so they can be more successful in their financial future.
Here are some tips to help you raise your children with a strong understanding of money and financial literacy:
1. Talk about money openly.
When your children are old enough to be asking for spending money, it is time to talk to your kids about the reality of finances. By discussing what it means to save, spend, donate, and invest, you will help them gain a better understanding of how money works in the real world. You can also teach them about budgeting by setting up weekly or monthly allowance amounts that they need to stay within. Discussing a weekly or monthly allowance in return for household chores is a great way to start your children off with money to spend, and knowledge about the value of a dollar. Make sure that these discussions remain positive while still being informative so that they remember these discussions years down the line!
2. Model good spending habits.
Kids learn by example, so it’s important that you show them good spending habits that they can learn from. Explain why you are making certain purchases and explain when it is appropriate to make impulse buys or wait until after saving for something else first. If the kids are in the car, tell them that you’re going to make lunch at home instead of going through a drive-thru. When you choose the store brand over the name brand when shopping, explain to the kids why you put down the one product in exchange for the other. Showing your children how to develop good spending habits gives them the confidence they need to succeed with money and develop financial literacy later in life. Kids who learn practical financial skills at a young age are more likely to feel comfortable making larger monetary decisions on their own as adults.
3. Teach kids how to make wise decisions.
Teaching your kids the power of wise decision-making is a great way to ensure their success in financial matters down the road. Explaining concepts like delayed gratification, investing for retirement and understanding risk versus reward will help them understand not only how to make smart decisions, but why those decisions should be made as well. When we take the time to show them how to carefully assess their expenses and plan for their future needs, it will give them a strong foundation for managing their own money in adulthood and enhance their financial literacy. Teaching kids about responsible financial management can help them understand the importance of saving money instead of wasting it.
4. Introduce financial apps or techniques.
Technology has made learning about finances easier than ever before! Introducing your kids to services like Mint or Acorns can show them how easy managing their finances can be if done electronically. There are many free apps that are simple to use. With some assistance, a financial planning app can become a learning opportunity for your children. For younger kids without cell phones or tablets, making a chart on a whiteboard works just the same! A visual representation of how money is spent and earned helps children see exactly what their spending habits can do to their savings.
5. Give them responsibility over their own money.
Taking ownership over their own funds gives children a sense of independence and helps reinforce lessons learned from conversations at home about money management. Start by determining a fair weekly or monthly allowance. Kids can earn allowance money by doing household chores, babysitting siblings, or helping with other tasks at home. Next, have them open savings accounts that you both contribute to. The allowance money can be put into their savings account on a simple trip to the bank together. The kids then get to see how banking works, as well as learning to save their money. Move onto other accounts like checking when they get older. Each account allows them a different degree of responsibility over their own money until they reach adulthood.
Teaching your children basic financial literacy skills like creating a spend plan, saving, and investing can help to ensure that they make sound decisions when it comes time to manage their own money. Additionally, leading by example will show your children how beneficial good financial practices can be over the long-term. With patience and dedication, you may just find yourself with some fiscally responsible adults!
Looking to level up YOUR financial literacy?
Remember, kids learn from watching YOU. If you need to improve your financial literacy, we can help! We’ve got online courses to help you expand your financial knowledge and shift your mindset around money. We also have a supportive Facebook group, the Money Bitch Community, where you can share your struggles and successes and get real-time support and encouragement.