The science of money is extremely important for an adult. However, it is often forgotten that a competent attitude towards material values should be established from a young age.
Parents need to instill in their children the right attitude towards money even before school.
Indeed, according to many psychologists, the development of financial literacy will not only help a child avoid many problems, but also save time and stress for adults.
In this regard, parents should understand the importance and several rules for teaching a child about financial literacy.
First, let’s understand what financial literacy is. Financial literacy is the ability to use knowledge and skills to make good decisions about money and spending.
Financial literacy covers a wide range of different financial topics, from daily personal financial accounting skills to long-term personal financial planning for retirement.
The Importance of Teaching Kids Financial Literacy
It is important for parents to understand that sooner or later, children will still hear some facts about money, and they will have an impression of finances based on external data.
These data from the outside, as you know, are often erroneous. Classmates may say that you can only become rich if you steal.
Or at a sports club, someone may blurt out that only the lucky will become successful. Imagine the impact these statements can have if your child seriously believes his friends.
Therefore, it is important to teach your child that money must be earned by honest work.
(And – again – you don’t need to know the difference between weighted and exponential moving average in order to teach your kid the basic concepts of money, saving, and financial literacy.)
Teaching children financial literacy can help them clarify the links between work, earnings, costs, and savings; they will understand the value of money earlier and learn to make the right financial decisions.
In the future, it will help them easier understand different financial topics, like how to prepare for a mortgage process, how student loan debt works, or when to start planning for retirement.
How to Teach Kids About Money at Every Age?
Teach children about money at a young age, and they’ll have a head start. These are age-appropriate strategies to assist parents to start talking money with kids and start putting words into action!
Key basics for parents to teach children of different ages financial literacy:
Ages 2-3y
In your living room, set up an imaginary store and play with your child. Use plastic fruit, cereal boxes, or other household goods instead of actual money. Your child will learn the fundamentals of trade and how to exchange money for any goods.
You can start teaching kids to identify and name coins even if they’re too young to learn about denominations. Have your child trace the images of different coins on a piece of paper and have them match the images to the coins.
Ages 4-5y
To convey the concept of saving to your child, get him or her a savings jar. Reward good behavior with coins every now and then, and encourage them to deposit them in their savings account to watch their money grow.
Replace the coins with notes of equal value on a regular basis. This will assist your child in comprehending the worth of various denominations. It also increases their excitement and pride in their collection.
Ages 6-10y
This is a good time to start giving your child a weekly allowance in exchange for helping out around the house.
Teaching your child the value of money at a young age will help them prepare for the fact that most of us must work to pay for almost anything we wish to buy or do.
Saving for a large purchase, such as a new bike, will teach kids the distinction between short-term and long-term goals.
It’s also time to give them a place to save their money. It’s time to go to the bank! Assist your youngster in opening a savings account and encouraging them to make regular deposits.
There is no monthly cost for a Youth account, and you can make unlimited transactions. This is a fantastic location for them to start saving. You can discuss the notion of interest and the advantages of keeping your money in the bank as its balance grows.
Ages 10-13y
Your teenager will most likely prefer to spend time with their peers over you. New duties accompany this new independence. Make a list of things they’ll need to pay for in order to get ready for high school (i.e. their first-day outfit or fees for an after-school activity).
Discuss wants vs. necessities to assist them in creating a budget. Encourage them to earn money by car washing or assisting in the library.
Allow your teen to take a small loan for certain purchases. This will assist your child in understanding debt and how to overcome it.
This is also the moment to transition their cash allowances to electronic transfers into their bank accounts so that kids may begin to understand how banking works.
Ages 14-16y
Give your teen access to their internet banking account to give them more control (joint with you, of course, so you can continue monitoring it).
Show them how to write a check and send an e-Transfer. Give them their own debit card, but not a credit card. Because teenagers are vulnerable to fraud, talk about strategies to protect their personal information.
If your kid gets a part-time job, it may be time to reduce or eliminate the allowance.
This is an excellent opportunity to teach children about credit and how having high credit can help them achieve their long-term goals, such as buying a car or renting an apartment.
It’s also the best time to start talking about who will foot the bill for post-secondary education.
16y And Up
When tax season arrives, assist your teen in completing their first return. It’s a significant achievement that helps them feel like an “adult.” Taking them through the process now will benefit them in the future.
Encourage your teen to look for and apply for scholarships that will help him or her pay for tuition and other post-secondary expenses.
If your kid does not work during the school year, a summer job can provide them with vital employment experience while also helping them save money.
When you think your teen is ready for the responsibilities of a credit card, add them as a secondary account holder to your own card. You can track spending and set up alerts to tell you when your child approaches the budget you set using.
Educate your child to be wise about money.
At first, you may find it uncomfortable to talk to your child about money. However, if you learn to talk confidentially with him on this topic, in the future he will be able to freely discuss financial issues and make wise decisions about his money.
In order for your children to be able to properly manage money, you – the parents – must prepare them and teach them financial literacy. It is the ability to handle money correctly that can become a decisive factor for the success of your child in the future.
***Author Bio: Robert is an entrepreneur, finance professional, consultant, and passionate writer. For many years, using his industry knowledge and experience, he has helped his clients to create more wealth and reduce costs.