Financial literacy is the foundation of financial security. Teaching it to kids can help them develop the money management skills necessary to achieve financial stability later in life. Unfortunately, it isn’t part of the curriculum in many schools worldwide. Although many believe financial education is necessary, implementing a mandatory course on personal finance into the school system often becomes a matter of priority. That’s why parents and adults must step in to teach kids about financial literacy.
According to experts, here’s how parents and adults can help kids improve their concept of money from an early age and beyond.
Ages 5-9
Aim to have “money talks” every now and then. Kids in these age ranges have limited linguistic capabilities, so only introduce basic money concepts. Although they still enjoy engaging in make-believe, avoid introducing money as a mysterious concept since it is a practical tool in life.
Instead, choose easy-to-understand money words, such as “earn, spend, or save,” and explain how it works in our daily lives. For example, explain how to use money when going somewhere, buying something, and setting aside funds for a plan such as a memorable family outing. You may also bring them to a grocery store and teach them which item is cheaper or why you use a coupon.
If kids show interest in money talks, don’t shy away from conversations about family finances and say, “The adults are talking.” It makes it easier to talk about finances with your kids in the future and helps them establish a positive money mindset.
Additionally, kids at these ages develop their ability to focus, learn how to prioritize, and understand the concepts of trade-offs. For example, they learn how to choose one thing instead of another. Take advantage of this development and teach them the difference between needs and wants.
For example, put necessities, such as eggs, milk, and bread, in your cart at the supermarket before letting them pick up candy, a toy, or stickers. Explain to them why you did so. Specifically, help them understand why we must spend money responsibly by prioritizing our needs before our wants and that we must always plan how to spend our money.
Ages 10-14
Tweens and young teenagers can understand that what they do now may have long-term effects, so it’s good to teach them more complex ideas about personal finances, such as income and budgeting. For example, make them earn their allowance through chores. It won’t only train them how to clean up but also help them be disciplined and patient in saving toward their goal.
Another way is to ask them to do groceries for your household needs and some of their wants. However, make them buy things under the budgeted amount. It will train them to make the most cost-effective purchases to get the best deal. It also explains what is financial irresponsibility, giving them an idea of why it’s important to live within their means.
Ages 15-17
Middle adolescents develop logical operations into a more mature level of functioning, enabling them to perceive and interpret situations in more nuanced ways. In other words, they’re active in problem-solving. With this cognitive development, teaching them about savings and investment will be a good idea.
Introduce stocks to your teens, not just brands. For example, let them know they can be a stockholder of the company they love. If it piques their interest, consider opening an investment account for them so they can learn everything about owning stock at an early age. Start with purchasing a fractional share of a mutual or an exchange-traded fund. Don’t worry, it’s only as little as $1.
If stocks aren’t their thing, encourage them to work a summer job and put aside a part of their income in cash savings. Set them up a savings account and teach them the difference between saving in a bank and a piggy bank. Then, incentivize them to save for long-term goals by matching their savings up to a certain percentage, similar to how employers pay their employees’ retirement plans.
Ages 18 and over
Just because they’re old enough to get a job and earn income themselves doesn’t mean they don’t need parenting. Still, guide your adult children with their finances but in a way that doesn’t interfere with their choices and privacy. Above all, teach adult children about proper budgeting, taxes, responsible credit card use, and debt management.
Final Thoughts
Many parents are in a financial bind. They tend to overextend credit card debt, fall behind on payments, and live paycheck-to-paycheck. All of these can be rooted in poor money management.
Help your kids avoid these financial challenges by teaching them financial literacy now. Teaching them about earning, spending, saving, investing, borrowing, and debt management at a young age helps them develop healthy, lifelong financial habits.
Also read: Why Teaching Swimming to Kids is Incredibly Important