How Parents Can Teach Kids Financial Literacy While Learning It Ourselves
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Financial literacy involves understanding and managing key aspects of personal finance, such as budgeting, tracking expenses, saving, planning for retirement, and managing debt. These skills are essential for making informed decisions about money and avoiding unhealthy financial habits. It’s important for parents to actively teach their children about money, rather than relying solely on schools or peers, to foster a healthy relationship with finances from an early age.
Here, some tips for how to teach kids about money while you’re still learning about it yourself.
Start these conversations young: Money-saving expert Andrea Woroch emphasizes that discussing finances with children should start early and can be integrated into daily activities like shopping or chores. She suggests using positive language about money, such as “we need to save for that,” to model healthy financial habits. Additionally, Sofia Ramirez from Crediclub recommends using a saving chart to visually track progress toward financial goals, which helps children understand costs and encourages saving, even aiding in basic math skills.
Be a model, not a mirror: Teaching kids about money by simply letting them observe your spending habits might not be effective and could lead them to mimic any poor habits you have. Instead, it’s better to actively model good financial behavior. Involve your kids in creating budgets and discuss financial decisions thoughtfully, especially when making sacrifices. This approach not only helps instill good habits in your children but also reinforces positive changes in your own financial behavior.
Play more than you preach: To teach kids about money, integrate financial literacy into activities like family game nights or screen time. Board games such as Monopoly Junior, Pay Day, and The Game of Life can help kids learn money strategies and the consequences of their financial decisions. During these games, discuss each child’s choices to build trust and become a supportive resource for real financial decisions. For online games, consider Financial Football and Saving Spree. Listening to each child’s perspective allows you to tailor financial lessons to their needs as they grow.
Be sure kids have a bank account: Help your children start their financial journey by finding their first job and opening a bank account. Whether they’re earning money through tasks like babysitting or pet-sitting, it’s an excellent time to introduce them to banking and encourage monthly deposits. For families without easy access to banking, such as those using check cashing services with high fees, it’s essential to find a suitable bank for your child to build a solid credit history. Research different banks and credit unions together, comparing fees, interest rates, and terms. This early banking experience is crucial and could even lead to discovering better banking options for your own finances.
Don’t forget to talk about debt: For high school students, start teaching responsible credit card use by adding them as a secondary user. Show them how to read credit card statements, manage payments, and understand annual fees and protections compared to debit cards. For middle schoolers, use gift-giving seasons to teach about debt by charging interest on borrowed money and explaining how it works. Have them pay extra when repaying and set consequences if they fail to repay.
Talk about the economy and news: Keep your child informed about the economy by explaining how current events and inflation affect budgeting and personal finances. This understanding will help them better manage their finances in the future.
Make gratitude and generosity part of the conversation: If your family is thriving despite economic challenges, use this opportunity to teach your kids to appreciate their blessings and help others. Encourage them to raise money for a cause to increase their awareness of how money can benefit others and develop their social consciousness.
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