Too often, financial literacy is something we expect our kids to learn after they get a job. But by then, well, it’s already too late. So how young is too young to talk to kids about money and finances?
Experts say there’s no such thing as too soon. Chances are, teaching your kids the basics of credit, debt, savings, and investing, will also help you learn a thing or two about how much the economy has evolved over the last few years.
There’s no time like the present to tackle any hesitations you might have about teaching your kids what they need to know to become financially independent.
Financial literacy sounds flashy, but its meaning is pretty straightforward. Simply put: it is the know-how to budget, track expenses, save, plan for retirement, and manage debt. These basic financial skills are foundational concepts that later help young adults balance their needs against their wants, and help adults decide between risky investments and well-leveraged debt.
Without these fundamentals early in life, kids can fall into habits that equate money (or gifts) with happiness, love, and entertainment (in the long run, some of these patterns are hard to break).
From tots to teens, your kids will eventually hear about everything from allowances to Zelle, so build a healthy relationship with them by talking about money and wealth building directly.
Start these conversations young
Money-saving expert Andrea Woroch says it’s never too early to start talking about finances, and it can be as simple as taking them shopping or doing everyday chores around the house. “Your children learn from your habits and the way you spend or save and even talk about money will shape how your children manage money in the future, even if you don’t realize it,” says Woroch. It can be as simple as using positive language when you talk about money.
Try saying “we have to save up for that” or “that’s not how we choose to spend our money,” instead of “we can’t afford that” to set a healthy financial goal for your impressionable child.
Be a model, not a mirror
Most people think that the easiest way to teach their kids about money is to let them watch what they do—from the grocery aisle to online shopping. Nice try! You might be surprised to see your own vices mirrored back after your kids mimic your possibly bad habits. Instead, practice being a role model of what you hope they (and you) would do when confronted with money problems or opportunities. Model your best behavior and, in so doing, you might convince both your kid, and yourself, that old habits are worth breaking.
Changing patterns in front of your children adds a heightened sense of accountability, which may help you stick to your new ways while instilling great habits earlier in their lives.
Play more than you preach
Rather than only teaching money matters through weekly allowances or during real-life shopping trips, incorporate financial literacy into family game night or screen time. Check out these online financial literacy games for children (and adults) or board games like Monopoly and the Game of Life . While playing with funny money, parents would be wise to start conversations about why each kid—different from one another—made their own choices.
This will help parents gain trust and become a confidante when there are real cash choices to make.
Parents who listen more than they talk can tailor their message to each child’s needs as they grow up.
Be sure kids have a bank account
More than 6% of American households (over 14 million people) are unbanked, which means they don’t use a bank for their primary financial needs. Using local check cashing or money exchange services spells high transaction fees. It becomes hard to build a strong credit history, required to access a bank loan for all major expenses, including a car, a home, and even education.
At Fitzsimons Credit Union, you can open a Youth Savings Account with your child. Our Youth Savings account is a great starting point for learning how to handle money. Also on their birthday month, they’ll receive a birthday check from us. Ages 2 to 5 receive a $5 check, while ages 6 to 12 receive a birthday check that matches their current age.
As your child matures and understands the concept of savings, they will be able to transition into a checking account starting at the age of 13, like our Kasasa Tunes® Teen Checking which offer rewards up to $10 per month – see our website for more details.
Talk about the economy and news
“It’s important to keep your child in the know with what’s happening in the economy,” Woroch adds. “You can explain what you’re doing now to adjust for inflation, which all comes back to balancing a budget.”
Understanding the basics of how news moments and the global economy impact personal finances will help them in the long run.
Make gratitude and generosity part of the conversation
If your family is doing well despite economic downturn, you can teach your kids to appreciate what they have and encourage them to help others in need.
This is also a great way to develop their social consciousness.
“Your children learn from your habits and the way you spend or save and even talk about money will shape how your children manage money in the future, even if you don't realize it,” says Woroch. It can be as simple as using positive language when you talk about money.
An allowance is an effective tool for teaching kids about money management. Instead of handing out money without strings attached, consider linking the allowance to age-appropriate chores or tasks to help them understand the relationship between work, effort, and earning money.
Board games can help kids learn the importance of thriftiness. Payday is among the best for teaching kids valuable money management skills where players have to make their money cover expenses. They can purchase items, take out loans, and learn to budget.
“Your children learn from your habits and the way you spend or save and even talk about money will shape how your children manage money in the future, even if you don't realize it,” says Woroch. It can be as simple as using positive language when you talk about money.
Teaching kids about money early on will help them to become more financially independent as they get older. Financial education has been linked to lower debt levels, higher savings, and higher credit scores as children mature into adulthood.
Facilitate debates on real-world financial news or have students create presentations on different investment strategies. Role-playing scenarios like negotiating a car purchase or comparing credit card offers can also be highly engaging. Financial literacy isn't confined to math class.
Key aspects of financial literacy include knowing how to create a budget, plan for retirement, manage debt, and track personal spending. Financial literacy can be obtained through reading books, listening to podcasts, subscribing to financial content, or talking to a financial professional.
The ABA says the best financial lessons are part of everyday experience. Look for opportunities to talk with your kids about money, read books aloud, and play games that center around spending money wisely. Be open and honest when you discuss your own financial experiences—good and bad.
The 5 components of financial literacy. There's plenty to learn about personal financial topics, but breaking them down can help simplify things. To start expanding your financial literacy, consider these five areas: budgeting, building and improving credit, saving, borrowing and repaying debt, and investing.
The first step towards realizing your financial goals is creating a realistic budget. A budget is simply a spending plan that is based on your expenses and income. A written plan helps you stay on track, day to day and month to month, for meeting your financial goals.
At this age, financial education often focuses on basic concepts such as understanding the value of money, distinguishing between wants and needs, and beginning to grasp saving and spending. Games, stories, and interactive activities can be effective teaching methods for these foundational concepts.
The Khan Academy Financial Literacy course is self-paced and completely free. The course is made up of multiple units, each with its own lessons, covering topics like budgeting, saving, credit, investments, insurance, taxes, scams, fraud and more.
Learning about money and developing financial literacy from a young age can help children develop responsible money habits and attitudes for later in life. And managing pocket money is a great way for your child to start developing a general sense of responsibility and independence.
Introduction: My name is Jonah Leffler, I am a determined, faithful, outstanding, inexpensive, cheerful, determined, smiling person who loves writing and wants to share my knowledge and understanding with you.
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