The Importance of Teaching Financial Literacy to Children
You can teach your kids financial literacy even if you are not an expert. Basic foundational education in how money works will last a lifetime. Take the time to explain to them why it is important to save, invest and manage money. Explain in terms that are easy to understand and relevant to their perspective. Reinforce what you teach them by being open with your financial journey.
Taking an approach like this will not only teach them financial responsibility, there is also a good chance that it will inspire them later in life. They will always remember how mom and dad took the time to show them how money works. Kids are looking for leadership and when they grow up, they fall back on what they learned as children. If they learned how to value monetary responsibility at an early age, they will grow up financially literate and well informed.
In this article, you will be introduced to strategies that will give you the confidence you need to teach financial literacy to children. You will also find ways to make it fun to learn about money and fiscal responsibility. You may even learn some things you did not already know. Keep reading for more.
What is financial literacy?
Financial literacy is how well we understand money. It is more than that though. It is also how well we know how to use money as a tool. When we are financially literate, we are equipped with the knowledge we need to invest, save, and spend wisely. That way we can use money successfully to build an enjoyable life.
Many people do not have the advantage of growing up with an education in basic money knowledge. There are scores of people who could have done well in life, but they struggle because they do not know a few basic principles. We want to make sure our kids do not have to grow up that way. Which is why these basic elements of money are so important.
Money may not be the main component of success, but it is important. Just as important as learning about money and how it works is learning why we need to be financially literate. Kids may not be able to grasp the idea of retirement, but they can be taught the value of growing older with financial security. As adults, they will have to rely on themselves to make sure they have a comfortable retirement and a relatively stress-free life. Let’s look at how they can establish a nice foundation for financial literacy.
These three basic things kids need to understand. They need to understand the difference between needs and wants. They need to know how to spend wisely and they need to know how to set savings goals. They also need to recognize the benefit of knowing these elements of basic money management, but we will establish that throughout the learning process. Try to keep that as a common thread.
Teaching kids the difference between what they want and what they need will be a great lesson overall. It is important for responsible spending. You might need to adjust how you behave in your spending. Do you observe responsible spending habits when you see something you need? One of the best ways to teach is to model the behavior you want kids to learn.
Show them how you are setting a goal to save up for a special trip or some big purchase. Show them how you look over your budget and make the appropriate calculations. Just the act of doing it and bringing them along for the ride is a great way to instill a sense of value for responsible saving. Set up milestones and show them when you reach them.
Finally, share in the joy of reaching the final goal. Show them how you were able to reach your savings goal and maintain your budget. You can also do this for them and with them in a smaller version. Maybe they want to save up for a game or a toy. Follow a simplified version of your action. Repetition of activities like this will encourage them to grow and see financial literacy as fun.
There is a great deal of research that suggests starting early is a good idea. The fact is kids recognize money at a young age. They see you engage in various transactions. They see it take place in the media. They begin to understand that there is an exchange going on. They learn that exchange can give them what they want. These are important lessons and how we teach them can make a difference.
This usually takes place when they are toddlers. Of course, you are not going to teach your toddler how to save up for a PlayStation 4, but you can still teach them the value of money. You can instruct them about the difference between a dollar bill and a quarter. That simple piece of information is a building block in long term financial literacy.
As they grow older they will be able to grasp more complicated topics. You will be able to teach them how to save and how to set goals. You will be able to show them how to have patience and delay gratification so they can reach their savings goals. This will take time, but it will be fun. There is great joy in seeing them make the connections. Better still, you will be establishing a lifetime habit that will give them a chance at a financially stable, happy life.
Even if you are not an expert, you already have the life skills and experience to teach financial literacy to your children. Just the act of paying attention to your finances and demonstrating responsible money handling will teach them a lot. If you couple that with actual examples and learning experiences for them then you will ensure they have a lifelong appreciation for financial responsibility.