I’m sure there are many of you that have ran into a situation that due to a computer malfunction or power outage, a cashier had to count your change back to you manually but had a rather difficult time. Unfortunately, that’s just the tip of the iceberg as financial literacy for kids seems to be more of an afterthought than a requirement these days.
Financial literacy for kids helps prepare them to be able to achieve their personal financial and life goals with knowledge, skills and motivation. And when it comes to dealing with financial literacy for kids, you need to start them with the basics.
Where to Start
Most of us realize that there’s really only three things you can do with money spend it, save it, or give it away. However, all too many kids these days only have interest in the first one and while giving it away may become important to them later in life, saving it and proper managing their money is an extremely important aspect of financial literacy for kids.
Kids are taught addition and subtraction in school, but not how to make a budget. Practice is a great way to help them learn about budgeting. Start by teaching them that when they receive money from birthday gifts, holidays, allowance, or a part-time job to pay themselves first by putting a set amount into a savings account that is in their name. You can also take this opportunity to teach them the importance of giving and have them donate a certain amount to a charity of their choosing.
These practices coupled with allowing them to spend the rest reinforces good money habits that can help them when they are older and independent and they continue implementing the lessons you taught them.
Teach Them the Difference Between Need & Want
For a good portion of most childhoods, there’s a virtual ton of stuff and merchandise that they want, but will adamantly claim they absolutely need. Teaching them the difference between the two is a definitive first step in teaching financial literacy for kids.
Everyone in life needs food, water, shelter, access to transportation, and clothing. However, while food is a necessity, eating out every night is a want. The same goes for clothes, they’re definitely a need but having the latest trends and designer clothes is a want. Now, that doesn’t mean that they can’t ever grab their own pizza or purchase the latest offering from Nike, but learning to save and overall financial literacy for kids means knowing the different between need and want.
Saving & Earning Interest
A final important lesson for them is gaining the understanding that it’s better to earn interest on their earnings as opposed to paying someone else interest for something they want. Opening a savings account in their name with that mandatory deposit will not only teach them about savings, but compound interest as well.
Try searching bank account for kids to help you find the top children’s savings accounts, but before opening the account you should take the time to read all of the fine print regarding fees and minimum balances. This enables you to review the monthly statements with them to teach them how the interest on their money grows over time.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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