Teaching Your Child the Basics of Financial Literacy
The sooner you start teaching your child about money, the better. Of course, your seven-year-old doesn’t need to know about stocks or retirement, but they can understand putting coins in a bank to save up for a special treat. If you’re ready to increase your child’s financial literacy and learning at every age, incorporate these lessons into their education.
Learning their numbers
Learning their numbers is an important step in their development for kids in preschool and kindergarten, and you can incorporate a financial lesson in their counting. “Show kids the different kinds of coins and bills, allowing them to recognize the differences, group them, and then count that specific set,” advises Danielle Kiser, writer for MoneyGeek.com.
Put them to work
The best way for your kids to learn the value of a dollar is by earning it themselves. Setting an allowance for the completion of age-appropriate tasks will help them understand that earning money takes hard work, focus, and dedication. “An allowance can also help teach budgeting skills. Family-oriented apps like BusyKid and GreenLight let you assign a dollar amount to each task and send the funds to their account with a few quick taps on your phone,” explains Daniel Kurt, writer for Investopedia.com.
Keep communication lines open
Money matters and financial literacy are complicated subjects, and the more you talk about money, budgets, finances, saving, and investing, the more willing your kids will be to talk about it, too. They will understand that the topic of finances isn’t off limits and that it’s okay to ask for help when they don’t understand how to handle money. “By frequently having age-appropriate money conversations with your children early on, you can create a more open environment for learning and asking questions about finances,” says Kevin Payne, writer for Bankrate.com.
Open their own accounts
A big step up from the piggy bank and allowance-managing apps in the journey of understanding finances is when you open up accounts at a financial institution in your kid’s name. You can choose personal checking and savings accounts designed specifically for tweens and teens that allow you a good amount of oversight. According to Kiser, “Personal checking and savings accounts do not establish credit, but they do show an ability to handle your finances.”
Advise them on financial responsibility
Saving money is great, but your teen is going to want to spend. One way most people spend money is with a credit card. Credit cards can be a lifeline in an emergency, but they can also be a source of surprising financial pitfalls. It’s important that if you’re going to set your kid up with a credit card — perhaps when they are college-bound — to impart wisdom on how to handle it. “Teenagers must learn the dangers of credit cards and how to use them wisely. Teach them to pay off the balance and avoid buying things they can’t pay off each month. A good way to explain interest charges is to look at the interest a bank pays you on a savings account versus what a credit card charges you to use their money,” reports Kiser.
With open lines of communication, early discussions, continuing conversations, and attention to your kid’s financial intelligence, you will be able to help them grow into smart money managers.