It wasn’t until I was in college that I took my first financial literacy class. I was married before I picked up a book on the topic. We all want the best for our kids, and developing a healthy money mindset is a part of that. Studies show a strong connection between kids’ financial literacy and financial well-being in adulthood. So in order to set our children up for a bright future, as parents can start teaching them the ins and outs of money as soon as possible.
As daunting as it sounds, teaching kids about financial concepts doesn’t have to be a chore. With a few hints and tips (which you’ll find below), you can transform learning about money into a fun, interactive, and engaging experience for both you and your children!
Growing up, I didn’t know anything about money. I assumed that by the time college came around, there’d be a huge savings account with my name on it.
Like so many, my parents had been preoccupied with paying bills and keeping a roof over our heads. They hadn’t set aside money for my future. I took out loans for my tuition, and applied for scholarships, which made me anxious. Throughout my college years, I made a point to work hard, and earn as many scholarships as possible. So I wouldn’t have debt looming over me for the rest of my life. It was this experience that kick-started my ambitions to promote financial literacy with my kids.
Yes, this is something that should be taught in schools, but we can’t depend on schools to teach everything. And financial literacy is really important. I’m sure you’ve heard that home is the first school and parents are the first teachers. Well, it’s true! In my opinion, a great way to raise financially literate kids is to start the learning process early. And by incorporating teaching exercises at home.
Below are a few ways that I teach my kids financial literacy – try a few out for yourself!
- Listen to financial podcasts such as Dave Ramsey with the kids. This guy is a consistent and easy-to-follow money expert. His podcasts and audiobooks are filled with tons of easy-to-understand financial information that your kids will love. I love to listen to the Smart Money, Smart Kids audiobook in the car with them. So be sure to check it out!
- Discuss the difference between assets and liabilities, debt and savings, and debit and credit cards. All of these new terms can get confusing for kids (and adults). So working to establish a fundamental understanding of what each is can really help in setting up a financially informed future.
- Talk about saving for college and cars. I want my kids to be able to enjoy their college experience and all of the wonderful opportunities that come with it without worrying about how they are going to afford it all. That’s why I teach them the importance of saving money early and often so they never miss out on the experiences that will shape them.
- Discuss wants vs needs. On the topic of cars and college, an important part of that is having an understanding the costs, and wants vs needs. They may want a fancy car and think that they deserve it and can take out a loan. But just need a vehicle to get from point A and point B. They aren’t entitled to it just because that’s what they want. And there’s nothing wrong with working while going to school or going to a community college to save money on tuition for a few years. Many careers these days don’t care what university name is listed on your diploma.
- Act as financial support. As our kids’ financial literacy grows, my husband and I like to make them feel supported in their endeavors. For example, when Jayda learns how to drive and now needs a car, we will support her by agreeing to match the amount of money she have saved. IE: If she has saved $2,000, we will match that amount, and she can buy a $4,000 car.
- Learn about retirement. I encourage my kids to work toward finding a job that they love and are passionate about so hopefully, the thought of retiring rarely crosses their minds. But I do understand that no one can work forever. Which is why I teach them the importance of setting up a retirement fund (it’s never too soon) for when the time comes that they can’t or don’t want to work anymore.
- Discuss emergency funds. We never know what financial disaster could be just around the corner, so I like to teach my kids the importance of having “just in case” funds instead of taking out credit cards and loans. I don’t want my kids to even consider them as options.
- Give them financial power over money decisions early. My husband and I buy things our kids need like clothes, food, and school supplies (with the odd gift thrown in for holidays). But the kids are required to buy things they want, like toys and games. This both helps with our family budgeting and develops effective saving habits for Jayda and Ty (and soon enough, Lee Lee). We also encourage them to think before they buy in the hopes that they will avoid impulsive shopping decisions in the future.
- Allowances. We don’t provide our kids with an allowance, but we do pay them for the chores that they do. A dollar a day for cleaning and more for any extra tasks like babysitting, editing videos, picking up dog poop! Everyone has to chip in around the house on certain things, but their chores are like little jobs they do to learn about earning money. It helps to provide kids with money so that they can begin to practice good spending and saving habits as soon as they can. We stock up on $1 and $5 bills and the kids store them in clear jars and are excited to see their money pile up.
- Highlighting the importance of good grades. Good grades aren’t just necessary for getting into college or a great job, they can be crucial to securing scholarships. I like to make sure that my kids are aware of this, so they are motivated to work to the best of their ability.
Are you brand new to developing kids’ financial literacy and finding it all a little daunting? Don’t worry!
Here are a few quick tips you can try today!
- Read If You Made a Million together with your kids. This is a great way to teach young kids about money in a fun and engaging way. It breaks confusing financial topics like saving, spending, getting paid, interest, and more – it’s definitely one for your library!
- Enroll in a personal finance class on Outschool. These are excellent ways to teach your kids important money handling skills. Like conscious spending and avoiding debt so they can embark on a financially secure future.
- Talk openly about money. Money doesn’t need to be taboo topic. Sitting down to have an honest and open discussion about money, savings, and debt. It can help prepare your child for their future. It also gives them a chance to ask questions in a safe and supportive environment.
- Make a budget. Try letting your imaginations run wild with make-believe budgets and goals to help introduce your child to these important financial tools.
Now that you have some more information on the importance of kids’ financial literacy, it’s time to start implementing what you’ve learned. To help you, I’ve brought together all of my favorite resources and put them into this handy printable that’s filled with fun and interactive activities to help your kids plan and save for their future!
Make sure to download the Kids Financial Literacy Workbook here or print it out for easy access!
And if you want to expand on this newfound money knowledge, check out my previous post, all about personal finance books and mortgages or learn about how my husband and I paid off our mortgage in just 5 years (yes, it’s possible!).