Today, only half of the total population are capable of managing their finances. This is why some think that financial literacy in school is essential because young adults should know how to manage their money to avoid falling into debt. Financial literacy is the ability to understand and efficiently use different financial skills like personal finance, investing, and budgeting.
As parents, you should teach your children about saving money and the importance of building a secure financial foundation. Teaching your children the value of money and how to manage their finances, such as in the best kid bank account, will empower them when they become adults.
Why Kids Should Learn About Money
Kids are never too young to learn about money. Schools usually teach finance-related courses in middle school or high school because it is vital for them to learn how to live independently when they reach college. However, starting money conversations at a young age lets your children have a better relationship with money.
When kids learn at an early age to handle money, they acquire skills beyond just counting. They learn critical decision-making skills that are useful in adulthood. Analyzing how a certain purchase can affect their budget or their financial situation helps them make good financial decisions in the future.
Letting your children learn about the value of money and how to manage it also provides an environment of inclusion and understanding inside the home. It’s a great opportunity to let them know why you have a budget and how they can help save money for your family’s future. With this, they can feel included in the family’s decision process and have the confidence to voice out their thoughts.
How to Teach Kids About Money
There are many ways to teach children about the concept of handling money wisely. Are you confused where you should begin? Here are some things you can do:
- Start A Conversation About Money
Many parents think that talking about money is a sensitive issue and should not be discussed at home. Talking about money should not be scary or should not be considered as taboo. Financial discussions are important teaching opportunities where you learn more about how your child understands the concept of money. Telling your children about your financial capabilities will help them learn about hard work and responsible spending.
- Explain Where Money Comes From
Before you can teach them the concept of spending and saving, children need to know where the money comes from. Learning that money does not come magically from your wallet makes children learn about the value of hard work. It also helps that you show them how you work to earn money. If you get an opportunity to work from home, show them the things involved in your work or how much you need to finish to earn your salary.
- Teach Them the Difference Between Needs and Wants
After teaching them the value of work, help them differentiate between their needs and their wants. One good opportunity to teach them about this concept is when you create a budget or go to the supermarket together. Showing them how your budget works will also make them understand why sometimes you can’t give in to their demands of a new toy or gadget.
- Teach Them the Concept of Saving
Teaching kids about the concept of saving and having financial goals is a better way to keep them motivated. Do they want to buy a new toy or a video game? Teach them that saving money for it is the best way to get what they want. Do they want to travel to a certain place or go to Disney Land? Let them contribute when your family saves for traveling.
You must provide a timeline so that your child can visualize when they reach their goal. You can let them save until their birthdays or holidays like Christmas to buy some of the things they want for themselves. You can create a tracker to visualize how far they are from their goals or how much more they need to save.
- Provide A Place to Save
Once your kids have a specific goal in mind, provide them with a place where they can keep their money. Here are some of the best places to keep their money:
- Saving Jars or Piggy Banks – You can use jars or piggy banks when your child decides to have multiple goals in a year and wants to divide their money among these goals. It is also a great option for younger children since they will be encouraged to increase their savings and they can see the physical results of their efforts.
- Open a bank account – Having their own bank account can help teach your child the concept of saving money. Child bank accounts should require monthly deposits, and any withdrawals may decrease their interest rate. It’s a great opportunity to teach a child the concept of interest when you leave your money to grow.
- Set A Good Example
Children mimic the behavior of their parents. When your child sees that you are not smart in handling your finances, chances are they will follow this attitude. It’s a great idea to have a common family savings jar so everyone can contribute. The savings can be used as an emergency fund or money for something everyone in the family can enjoy in the future.
There are many benefits to teaching children how to manage their money. Being financially literate empowers children to make wise decisions when handling money and working on their goals. Aside from that, children need time to grow, and they might make mistakes in the future, and you should take it as a learning opportunity.
During your next budget planning, make sure that you bring them in to understand the concept of saving, budgeting, and wise spending. When they see that their parents are responsible for handling money, they will follow suit.
Money might be a hard topic to discuss with children, but talks should be casual. You also should be open to discussions whenever your children have questions or suggestions. Being open to them about your family’s finances and taking their suggestions will make them feel included in your decision-making process.