How Can You Start Teaching Your Children Financial Literacy

Every parent’s top priority is to love and provide for their children. While you can fulfil their needs and wants today, tomorrow, they will need to stand on their own. Therefore, it is crucial to teach children financial literacy at a young age. Inculcating knowledge about basic financial terms, money management, and fiscal discipline. As a parent, it is your responsibility to impart financial literacy to your kids to help them become responsible adults in the future. This article discusses 8 ways in which you can teach children financial literacy.

• Giving children a monthly allowance and imparting the knowledge of budgeting can help teach them financial literacy.
• Helping kids set goals and save for the same using bank accounts is another step in the direction of financial literacy.
• Gamifying your approach and using everyday situations is an easy way to impart financial knowledge.

Here’s a list of easy ways of teaching your children financial literacy:

1. Give monthly allowance

If you wish to teach children the gospel of financial literacy, start with a monthly allowance. Designate a fixed amount every month for your child as an allowance. Allow your child to manage this amount, giving them the freedom to decide how much they wish to spend and on what. The act of handling money on their own and managing expenses helps kids improve their money management skills.

2. Have review sessions

Another great way of teaching children financial literacy is to ask them to maintain an expenses ledger. Ask your kids to write down their spendings in a diary every day. Inculcating this habit early essentially helps you foster disciplined budgeting. Discuss and review the expenses on weekends to see how they are managing finances.

3. Set goals and save

Help your children understand the differences between needs and wants. Once that’s clear, help them set clear goals. Be it buying a new toy or getting a new outfit, teach them how to identify and set definite goals. With clear goals in place, tell them how they can save money and buy the things they desire or want. You can teach this chapter on financial literacy with a personal example as well by narrating your experience of saving for a goal like buying a bike or laptop.

4. Get your kids involved

This seems like a trivial way of teaching children financial literacy, but it surely goes a long way. Giving kids insights into how you and your spouse manage expenses in the household, save, and invest can help them better understand the process. In fact, it can even inspire and motivate them to do the same.

5. Explain with real-world examples

Most parents tend to shield their kids from the harsh realities of the real world until a certain age. While this may be prudent in certain aspects, it doesn’t work when it comes to financial literacy. Educating kids about how money works in the real world is a crucial step in financial literacy lessons. As a parent, you need to teach your kids about how to live within one’s means, stick to budgets, and maximise what you have. Talk to them about various occupations and how one’s payscale and income depends on them. It is important to create an active learning experience for kids to help them understand the importance of financial literacy in the real world.

6. Incorporate lessons in everyday things

The easiest and most effective way of teaching your children financial literacy is by sprinkling little lessons in everyday events. For instance, you can take your child to the market for grocery shopping. When they see you shopping with a list, you can tell them how planning ahead and listing down items beforehand helps prevent impulsive spending. Similarly, if your kids want something at the mall, you can talk to them about the pros and cons of the purchase instead of giving in to their demands at once. Doing so will help you urge them to think about the purchase, whether it is worth purchasing it at full price, or should they wait for sales and discounts. These little things add weight to your financial literacy training.

7. Get your kids to open a bank account

One of the most crucial steps in teaching children financial literacy is having them maintain their own bank accounts. Several banks now offer zero-balance, kid-friendly bank accounts. Open one for your child and have them save money from the monthly allowance for various goals. This will not just help them learn about the concept of banking early, but also infuse a disciplined savings habit.

8. Gamify financial literacy

Kids love games, and if you wish to teach them valuable financial lessons, there’s no better way than a simple board game. Easy-to-understand board games like Monopoly, Business, Game of Life, and Payday impart valuable lessons on money management, investing, financial planning, and career planning. In fact, these games also discuss the importance of investing money in real estate and stocks rather than hoarding it.

Teaching children financial literacy early can feel like a daunting task, but with the easy tips mentioned above, you can streamline the process. Learning the principles of financial literacy helps kids understand money management early, improving their chances of making fiscally sound decisions as adults. In short, equipping your kid with financial literacy helps ensure they have the skills needed for prudent money management in the future.

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