Teaching Kids Personal Finance From A Young Age

Teaching children about financial literacy inevitably falls on the parents’ shoulders in many cases. While some schools are now offering small lessons covering personal finance topics, many are not. The ability to properly manage spending, to regularly save money and to otherwise manage funds intelligently is essential for lifelong financial security. Without structured lessons about personal finance, children often learn about money by watching how their parents manage the family’s funds. This includes what you say about it, how frivolously you seem to spend it and more. Rather than leave something as important as personal financial literacy up to observations, you can structure their education with progressive lessons over their childhood.

Collect Coins in a Jar

At a young age, children may be excited about earning a few coins for doing chores around the house or when they find coins lying on the ground. Gather these coins together in a clear jar so that your child can see the value in saving even small amounts of money over time. This also shows your child that no money should go to waste and is a valuable early lesson in learning to save money.

Provide an Allowance

Once children are in elementary school and are able to do easy housework regularly, such as dusting the furniture or cleaning their room, you can pay them a modest wage for their hard work. You essentially assign them regularly responsibilities, and you pay them for their work if they have done a good job. This instills a solid work ethic in children and teaches them the value of money. With that allowance, they can save up to buy things that they want or need. In the process, they will decide if the cost of things that they want is worth all of the effort it took to earn the money.

Illustrate the Growth of Money

A portion of a child’s allowance should be allocated to savings. This may be accomplished by something as simple as putting money in a piggy bank. Every month or two, add up all of the money that has been saved. Create a graph so that children can visually see how their account balance is growing over time. You may eventually put this money in a children’s savings account so that children can see that they earn money by saving regularly. As they learn how to save, the ability to see the benefit of saving money is critical.

Give Older Kids a Reloadable Debit Card

Before your teenagers get their own debit card, consider using a reloadable debit card for a trial run. With a reloadable debit card, you can load the child’s allowance onto the card so that he or she can learn how to check or track the account balance and how to manage a budget so that they can afford things that they need and want.

Over time, you will notice that your children make smarter financial decisions. They may stop turning to you to ask for things that they want, and they will instead work hard to earn money for those things. These lessons do not cover the instant gratification associated with credit cards. While you may want to talk to your kids about how to manage debt as well, showing kids that saving money to get what you want makes those items attainable may deter the accumulation of debt over time.

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  1. […] takes a lot of their mental capacity to focus on reading the words. It is like understanding how to deal with money on the day you have first learned how to add and subtract. The capability is there, but the focus […]

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