Teaching your kids to be financially literate
Why Teaching your kids to be financially literate is important
Money and pensions service data shows that only 47% of children receive a meaningful financial education at home or at school, so millions are without any financial guidance at a time when habits are forming. Teaching your kids to be financially literate will help set them up to build healthy habits and learn to manage their money so that when they need it most they will know what to do.
Many of us know how hard it is to build those habits later on so instilling a healthy relationship with money early on will give them a great advantage. Deciding when your children are ready to learn about money can be difficult but the sooner they learn it they better their relationship will be with the money they earn.
Here are some ways you can start teaching your kids to be financially literate;
Introduce the value of money
This can be done by showing them how the things they love are brought to them, and how much they cost.
Forbes suggests using the scarcity principle, so that a monetary value is placed on their toys and clothes that they request. They can earn them by completing household tasks and chores so that they learn that the things they want are earned just how parents have to work to earn the money that pays for them.
This can be a great way to show them that when they want something they can’t always get it and If they can’t afford it yet it may take some patience to earn the whole amount.
Have honest conversations
You may think that your kids seem too young but many studies show that around 5-8 years old is when children start learning about money and building habits. This could be from those around them like parents or from their access to the internet. This is why it is important to try to educate them before they learn the wrong lessons from somewhere else.
Talk honestly about what you can afford and when they ask for something expensive explain to them why they can’t have it yet. This could help them figure out ways in which they can pay for it themselves and indirectly teach them how to manage their money to get the things they want.
Emphasises the importance of saving money
This could be done by opening a junior savings account for them so they can start learning to manage their money. Having a bank account as a child can feel like a big step, showing them that you trust them all whilst having supervision over the spending and teaching a valuable lesson.
It’s a win-win!
When children think of saving it is unlikely they will be thinking too far in the future, a great start is getting them to save for something they really want and teaching them not to spend it all impulsively or they won’t be able to reach their goal. They should learn why saving money is important, and what their own goals for saving are.
Encourage a summer job
Encouraging your children to find a summer or weekend job where they can make money, especially if you are not in a position to give them pocket money can be a really rewarding and valuable experience. They can begin to earn their own money as well as learning about being in a working environment, discovering dynamics with bosses and colleagues.
Beginning to earn money helps children to start prioritising their wants and needs as they will be able to see how much they really have to spend and know what it took to earn it.
If your children are too young then you could give them jobs around the house, other family members or friends houses for them to earn smaller amount of money.
