Daily activities that can teach kids financial literacy
At some point in their adult lives, often early on, many parents have had to learn about the harsh consequences of poverty. money management. It could be the month you fell behind on your rent payment or the time you went overboard with credit card debt. If you want your children to avoid these same pitfalls, you must start teaching financial literacy sooner rather than later.
Research, including influential work by David Whitebread and Sue Bingham of the University of Cambridge, suggests that many of our financial habits are established by the age of 7. If the right habits are not formed early on, it becomes increasingly difficult to direct your offspring in the right direction.
How, then, do parents teach about the dollar and other key financial lessons? Here are some basic steps you can take immediately to get them on the right track.
Key points to remember
- Having children earn their allowance through household chores can help them gain the independence they will need later in life.
- Opening a child-friendly savings account or debit card teaches the value of saving and provides an introduction to the banking system.
- Allowing your kids to watch budget discussions can help them learn to spend responsibly and find cooperative solutions.
Make them earn their allowance
Regardless of their age, one of the most important lessons you can teach children is that money is a finite resource. When they have to work for their money – as you probably do – they will learn to use it with more caution.
Many parents are used to providing their children with a weekly allowance, which in itself can help teach budgeting skills. Better yet, it would be to make them earn that money by doing household chores. Making the mental connection between income and personal effort is something that will pay huge dividends as they grow up and fly in the co-op.
These days, you don’t need a big bundle of cash in your wallet to compensate them for the odd jobs they do around the house. Applications such as BusyKid allow you to assign a dollar amount to each task, which is added to their total allocation.
Encourage part-time concerts
High school can be a busy time for teens, with homework and extracurricular activities taking up a good chunk of their week. Still, if they can devote only a few hours to working in a cafe or retailer, they’ll likely be better at it. On the one hand, they will be less inclined to spend their money on frivolous things when they have to work seriously to get it.
You don’t have to wait until you are old enough for a formal job. You may find that your middle school student or high school rookie can make a bit more money by mowing the lawn or walking the neighbor’s dog. Websites like Nextdoor and even your homeowner’s association newsletter can be effective ways to connect with local residents who need a little help.
By the time they start earning an actual paycheck, you can also help them open a Roth IRA with some of their earnings. If you can, consider helping out with a match. This is another life lesson that you can help them learn early on. And this is a good opportunity to introduce the concept of the time value of money.
Make them contribute to purchases
Almost every parent knows what it’s like to take their kids to a store and be inundated with requests for various toys or video games. Maybe that shouldn’t come as a surprise. Young children, in particular, still don’t understand that there is little money you have each month for discretionary shopping.
One way to get the message across is to have them contribute these non-essentials. If it’s not their birthday or Christmas, tell them they have to pay half the price for a new Lego set or an American Girl prop. Your kids will have a better idea of what things really cost, which is important. They will also learn that they need to save their allowance to make larger purchases and that they need to prioritize, just like you.
Make it a game
Who Said Learning About Finances Has To Be Boring? Even board games can help children understand the importance of the economy.
Payday is among the best for teaching kids valuable money management skills. With the next paycheck in a month, players need to make their money last. They can buy items that they think will allow them to make a profit and even take out loans, but going after them can create problems, especially when there are other bills to pay. Seems familiar?
Even the monopoly can provide some pretty important lessons, with participants choosing which properties or buying strategies will yield the biggest gains and measuring risk versus reward with every move they make.
Open a bank account
The venerable piggy bank is a useful savings vehicle for younger children, but when they get to elementary school, consider opening a children’s account at an actual bank. It’s a good way to instill in them the importance of gradually building their balance, and it gives them an introduction to banking to get started.
A more modern approach is to give your tween a kid-friendly debit card, like those offered by Greenlight and GoHenry. Children can earn money from housework or an allowance, then use the cards to shop online or in a store. They will quickly realize how quickly their account balance decreases when they overdo it. Both products emphasize transparency, giving parents the ability to control where children can use their card and send notifications after each purchase.
Launch them on stocks
One of the keys to long-term financial health is knowing how to invest wisely in stocks and obligations. If your children can learn some of these tools long before they start their first full-time job, so much the better.
One way to do this is to open a small custodian account at brokerage for which they can help direct investments. There’s nothing like first-hand experience to teach them about the volatility of different investments and the need for long-term perspectives. Eventually, these assets will come under their control when they reach the age of majority.
Conveniently, apps like the aforementioned BusyKid allow kids to buy shares of companies, like Disney and Netflix, right from their bank account, making it easier. become a stock market player.
Have honest conversations about money
Perhaps the most important thing you can do to improve your child’s financial literacy is to be open and honest about your family’s finances. Parents often worry that being too candid will only worry, especially if they are going through job loss or other stressors.
The reality is that at some point your children will face challenges of their own. They will be infinitely better equipped to deal with them if they know how to react. That doesn’t mean you have to share your bank statements, but you might find it helpful to talk about the need to stay on budget and cut down on some non-essentials during lean times.
Children tend to be much more perceptive than parents realize. If they see you making prudent decisions, they are likely to emulate these behaviors later in life.
The bottom line
Good financial habits don’t start from scratch – they have to be learned. By starting when your children are still small, they will be better equipped to manage their finances as adults, when the stakes are higher.