In today’s turbulent and ever-changing economic environment, financial literacy is vitally important. This doesn’t just apply to adults – teaching your kids to be financially literate will help them grasp the importance of attaining financial stability early in life. A strong financial education can really set them up for success later in life.
Unfortunately, most parents either don’t think to teach their kids about money or find it difficult to explain the ins and outs of financial responsibility. If you find yourself in either boat, don’t worry. Money and finance are not exactly the most exciting topics to learn about, especially for children, but teaching these topics can be done and done well. To make teaching your kids financial literacy a little more enjoyable for you both, we’ve put together a list of four tips and tricks to teaching kids financial literacy.
1. Openly Talk to Your Kids About Money
In most societies, talking about money is taboo. This makes gaining financial literacy extremely difficult because it’s near impossible to learn about money if everyone around you is afraid to talk about it. This is one of many reasons why it’s important to talk to your children about money.
No matter how you start or steer the conversation about money, children are naturally curious creatures and will undoubtedly ask questions (some of which will no doubt be unfit for polite company). When they do pose a question, use it as an opportunity to teach them something specific about how money works. This doesn’t have to be a marathon teaching session; a little bit here and there can go a long way.
Slowly over time, your kids will gain more knowledge about the workings of finance and how money management affects their life. It’s important to remember that even a little financial knowledge can go a long way. After all, with only 57% of adults being financially literate today, any type of financial literacy can help give your kids a leg up on life.
2. Gamify Finance: Financial Literacy Games for Kids
It’s no secret that kids love games! That’s why one of the best ways to teach kids how to save money is to turn it into a game, where they are rewarded for saving. The more they learn to save in your “game,” the more likely they are to carry that learned behavior into life.
Financial literacy games for kids help foster an association between saving money and satisfaction. Gamifying the process of saving money can require a bit of creativity, but there are tons of ways to teach kids how to make smart financial decisions through play.
One great way to make saving money a bit more fun for kids is to “match” the amount of money they save, much like an employer 401(k). For instance, you can have a rule where you will deposit an extra $1 in their bank account for every $1 of their allowance they deposit. Other fun ideas include:
- Creating fake credit cards for kids (you are the “credit company”)
- Playing games that involve making decisions with play money (think Monopoly, Money Bingo, Life, etc.)
- Turn saving money into a (friendly) competition between siblings
3. Have Them Earn Their Allowance
Many parents give their kids an allowance, which is great, as an allowance can teach children the basics of saving and budgeting. However, if you’re giving your child an allowance and not making them work for it, you may be missing out on an important learning opportunity about the connection between working hard and earning money. Having your kids work for their allowance will truly teach them the value of a dollar.
In turn, this will make them more appreciative of the things that they have and the money that they earn. They may be less likely to spend all of their allowances when they know that they need to work to earn more money and will instead learn to make smarter choices about how they spend their hard-earned allowance.
4. Explain the Importance of Insurance to Your Kids
Like other financial topics, insurance can be a tricky (and boring) subject for kids to wrap their heads around. Insurance, however, is an incredibly important thing to learn about early in life. Your kids don’t need to know all of the granular details at a young age (i.e. deductibles and the cost of premiums), but it’s important for them to learn the basics of how insurance works at an early age. As they get older, car insurance, health insurance, and life insurance will all become a big part of their financial lives – might as well start them early on the concepts!
Financial Literacy for Kids is the New Life Hack
Financial literacy is an incredibly important and underappreciated life skill, which means it’s important to drop seeds of financial knowledge early in your kid’s life. Preparing your kids for future financial success doesn’t have to be a chore. With the tricks outlined above and a little patience, you should have an easier time teaching your children how to make smart financial decisions that will help them succeed later in life.