10 ways to teach your kids financial literacy
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10 ways to teach your kids financial literacy

10 ways to teach your kids financial literacy

If you’ve ever tried to change your habits, you know how much effort it takes. Generally, people seek to improve their lifestyle, diet and financial decisions. Speaking of money, most workers live from paycheck to paycheck and consider themselves economically unstable. And this is no coincidence, as there is no financial literacy training in kindergarten, school or college. So by the time your children get their first paycheck, they won’t know how to use their money rationally. Lack of financial literacy can lead to impulsive spending, debts and a lower quality of life.

If you think you need to teach your children until adolescence, you’re right. Some studies say that financial management habits are formed before the age of 10. Sooner or later, your children will have to learn how to handle their money. But as a caring parent, you can help them develop this skill in an interactive and supportive way. It’s much less painful than facing the real consequences of debts and irrational decisions. So here are ten practical tips to guide you through your child’s financial education process.

1. Ask your child about his or her ideas of money

It sounds simple, but many adults are uncomfortable talking about money and children can feel that. However, regular calm conversations about money build children’s confidence and encourage them to develop their financial skills.

Try to find out what beliefs your child has about finances. Prepare yourself to get odd answers and don’t respond with laughter or dramatic emotion. Gradually you can dispel misconceptions, but don’t try to do it all at once.

Also, try to bring the kids in on family budget talks. That will be a concrete demonstration that an adult can manage money responsibly. The goal here is not only to build an example but also to get comfortable talking about money as a family.

2. Talk about earning, spending and saving

Start the conversation by explaining where the money comes from. And it is not enough just to say «Money doesn’t grow on trees.» In our digital age, a child may assume that money just comes out of an ATM. The key is to demonstrate the process of earning and the connection between work and money.  Tell your child what you had to do to get a job: get educated, go through internships and interviews. This will explain how many processes you need to go through to get a regular paycheck. Make sure your child understands the connection between the time you spend at work and the money you pay at the store.

3. Take them grocery shopping

Involve him or her in small tasks: let your child discuss prices, make a shopping list or count the money. Demonstrate and discuss spending decisions while shopping. Thus, you will give concrete examples that your children can model.

money management for children

Ask your kids to plan the budget for a meal or an event to practice their skills. It’s a great way to practice new money management skills through a small impact on your family’s daily life. Allow them to make their own mistakes and draw conclusions as a necessary part of the educational experience. Be tolerant of your children’s first experiments and discuss their decisions and their consequences. Such exercises will only give you results if you are willing to share feedback in a friendly, assertive way.

4. Discuss the difference between want and need

Explore the true meaning of need with examples of hunger and thirst. Try comparing the things they need every day — food or clothes — with toys or gadgets. This is a great way to talk about saving and being restrained in spending. It helps to understand that you can’t afford everything you want, but it’s important to buy what you need.

5. Avoid impulsive buys

Children can use emotional manipulation to get you to buy a new dress or toy. Instead of giving up, encourage your child to spend their own savings. You can also advise waiting a couple of days before buying anything over $10. This trick will give the child more time to think and prevent unnecessary spending.

Remember also that you are the main role model for your child, so it is better not to show a careless way of spending. When visiting the supermarket with your child, avoid impulse purchases. For this purpose, use a prepared shopping list and don’t buy anything while waiting in line.

6. Teach about lack of money

The idea that money is a limited resource and can only be spent once is difficult for the child to understand. Therefore, the meaning of decisions and their consequences must be learned from real-life mistakes. As soon as your children have savings, they can spend them all at once. Teach them that when money runs out, it runs out. This can be painful but will bring the role of long-term planning. Afterward, you can introduce your child to other strategies of saving and spending.

Refuse your children to buy something new directly, but not aggressively. Say in plain text «We won’t buy this thing now because I don’t have enough money with me» or «it’s too expensive.» Even if you can afford anything, restrictions are an essential part of the concept of money. With limitations, your child will understand the value of money. It’s also a reminder of the connection between money and hard work that needs to be done to have them.

7. Visualize to ease delayed gratification

Teaching your kids about long-term savings and debts will give them a head start. If you give your child pocket money, talk to them about setting a savings target. Encourage your kids to work towards it.

Visualization can keep children interested and engaged in achieving this goal. You can calculate the saved sum into percentages and draw a progress bar or a chart. Share your own strategies to make waiting more comfortable. In this context, you can also discuss the costs of college, cars, houses. By doing this, you will show that there are no unattainable financial goals if you are sufficiently motivated and in control of your actions.

8. Emphasize the importance of charity

If you occasionally give money to charity, discuss it with the whole family. Pay attention to your own motivation and explain why you do it. At first, the idea of just giving money away when there is a goal of their own may seem confusing to them. Talk about the role of charity for society and the individual. Ask them if they know someone who needs money and help. Children may choose a church, a charity or even someone they know.  Start with a small donation so that the child feels comfortable experimenting.

By doing this you’re teaching them at a young age that it is invaluable to feel the impact of helping others. If you introduce children to compassion and philanthropy at an early age, they are more likely to become volunteers and kind people as they grow up.

9. Use storytelling

There is a well-known psychological phenomenon: advising and recommending something to another person is much easier than making decisions yourself. Try to use this phenomenon to teach your child to think about consequences. Create a character that the child will want to be associated with. Also, think of a story and barriers to the character’s goal. You can use the well-known hero circle, which is used to create a sitcom, cartoon and game scripts. Allow your child to decide how the character will act in a given situation. Talk about the consequences of your child’s decisions and try out different options playfully.

10. Create money challenges

The researchers found that children save pocket money just because they enjoy imitating adult-like behavior. Making a habit of saving money while the kids are small may be the best approach if you want your kids to be savers as adults. Challenge your children to put aside a portion of every dollar received, and it will help develop this habit.

financial literacy for kids

Teaching children about money at any age will take time on your part. It won’t always be easy because abstract ideas are hard for children to grasp. And sometimes they just don’t understand what you mean, because they still have little experience in solving financial problems. It will take all the patience and willingness of the parent to teach his child systematically. Don’t forget, either, that developing any skill will require your involvement and a system, as well as regular feedback.

Children learn by playing, so it is better to give them simple tasks and bring emotions in the process of teaching. On top of that, you need to make sure that you don’t give your kids mutually contradictory instructions. For example, you may be very confusing to a toddler by saying that a person needs to spend money and save at the same time. Children will follow your lead, as you are the most relevant influencer. That’s why teaching financial literacy skills will require you to have your own system in handling finance. Do not complain about money in front of them, otherwise adopt them have their own issues with money when they get older. It is also better not to discuss finances when you are tired and not in the mood.

All these efforts will definitely pay off over time because you are investing in your family’s future. The earlier you begin to teach your child financial literacy, the sooner you will see your efforts’ results. Every time it seems like an odd family practice to budget, explain, or count your savings, remind yourself that you contribute to your child’s happiness and well-being. Of course, your children will make mistakes, but it is better if they do it under your guidance and with your care and support.

Financial literacy for
kids 6-13 years old
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