Financial literacy and good money habits are skills that everyone should have. With them, an individual can navigate life’s financial surprises and leverage opportunities. Without them, managing even everyday financial responsibilities can be a struggle at best and lead to financial ruin at worst.
Set your kids on the path to a successful future by teaching them money management skills early. When you do, your kids can demystify money, learning and practicing the skills they’ll need to succeed into adulthood. Your kids will develop a positive relationship with money, learning the discipline required to make smart money decisions for life. Here’s what you need to do:
2. Normalize Talking About Money
Talking publicly about money is often seen as taboo, but this seemingly respectful habit can do more harm than good. By avoiding talking about money parents can make it a mystery, leaving much to interpretation. Financial literacy for kids helps normalize the core financial concepts that are essential to mastering adulthood.
Talk about Take the teaching tool of autonomy a step further and give kids responsibility for managing their money. Whether they’re using their birthday cash or money they’ve earned, the responsibility of choice is a great teacher. Kids who are empowered to choose what they want make more thoughtful, strategic decisions over time.
This newfound financial responsibility also allows them to fail, which can be an even greater teacher than success. Younger kids may buy an expensive toy, only to be disappointed that they only get one item, not several. Older kids may learn that their busted budget won’t allow for a movie night with friends. Real-life experiences from personal money management give kids an opportunity to put into practice what you’ve taught them. Work with your child to think through what happened, empowering them to decide what to do next.
5. Demystify the Role of Interest in Personal Finance
One of the biggest financial literacy gaps in adulthood is an understanding of the role of interest in personal finance. Beyond just the interest rate offered to personal savings accounts, kids should understand how and when interest plays a role. Start basic with the cost of borrowing money for things they may be able to understand, like cars. Then, increase the complexity by explaining student loans and credit cards, using real-life examples and including them in real discussions.
Younger kids’ story problem skills can provide opportunities to explain interest earned on savings. Classic board games like Monopoly, of which there are junior versions, too, are full of financial learning opportunities. As kids get closer to college age, break out the loan amortization table to reveal the true cost of education. Discuss loan repayment and their potential income to determine repayment ability, an immediately actionable discussion that may influence their future.
A Firm Financial Foundation Pays Dividends for You and Your Child
Kids who learn money management skills early often grow up to be confident, capable, and successful into adulthood. By understanding basic financial principles and learning skills like self-control, kids can responsibly manage their finances. Kids will grow to be more independent and self-sufficient, and less likely to rely on their parents for financial help. Teach your kids money management skills and they’ll be on the path toward a successful financial future.