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The average American does not have $300 in the bank, per many reported surveys and studies.
In the world’s most prosperous country, how is this possible? In two words, Financial Illiteracy. Our society has not made it a priority to teach kids about money, so naturally they grow up without these skills. The understanding of basic financial concepts and the ability to make informed decisions about money is an essential skill for everyone, including children. The earlier children learn about financial literacy, the better equipped they will be to make sound financial decisions as they grow older. Here are some of the best ways to get kids to be financially literate:
- Start early: The earlier you start teaching your kids about finances, the more likely they are to develop healthy financial habits. Even young children can learn basic concepts like saving, spending, and earning money.
- Use real-life examples: Children learn best when they can see the real-life applications of what they are learning. For example, when teaching about saving, you can show them how to set aside money for a specific goal, such as buying a toy or saving for a trip. There are even clear-plastic Piggy Banks with compartments for Saving, Spending, Donating and Investing to make it real.
- Use games and interactive activities: Children love games, and incorporating financial literacy into games can make learning about money fun and engaging. You can play money-themed board games, complete financial literacy quizzes, or have them create a budget for a pretend vacation.
- Encourage allowance: Giving children an allowance is a great way to teach them about managing money. Encourage them to save a portion of their allowance, spend some on wants, and donate a portion to a cause they believe in.
- Set a good example: Children learn by observing their parents and other adults. By modeling good financial habits, you can show your kids what it means to be financially responsible. This includes saving money, living within your means, and avoiding debt. If you have a financial advisor, introduce them to your advisor and explain why you have hired a financial expert.
- Teach them about investing: Investing is a complex concept, but it’s never too early to start teaching kids about it. Explain the basic principles of investing, such as the power of compounding, and consider setting up a small investment account for them.
- Talk about money regularly: Financial literacy is not something you can teach once and forget about. Regular discussions about money can help reinforce the concepts you are teaching and encourage your kids to ask questions. Given the financial world changes often, frequency is vital.
- Use technology: There are many financial literacy apps and games that can help make learning about money fun and interactive. These resources can supplement the lessons you are teaching at home.
- Make it a family activity: Encouraging your kids to take an active role in managing the family’s finances can be a great way to build their financial literacy. Have them help create a budget, track expenses, or compare prices when shopping.
- Encourage critical thinking: Teach your kids to think critically about financial decisions and the potential consequences. Encourage them to consider the long-term effects of their spending and saving choices.
The lack of financial literacy in the world is disturbing. However, like all disciplines, if parents start early and stay with it, they will raise children that will not have to worry about having enough money for an emergency or fulfilling their wants.