Financial literacy skills are incredibly important as we go through life. And for many parents it continues to be very surprising—a little shocking, even—that most schools don’t teach their students about money.
However, as a parent you can teach your child important some very financial lessons. As every parent knows, your kids are watching you at all times – it can be difficult to know which lessons to emphasize.
Here are the most important money lessons to impart to your children, broken down by age group.
1. Set a Positive Example
If you’re spending indiscriminately or putting everything you purchase on a credit card, at some point your children will notice. If you and your spouse are stressing out and arguing about money, they’ll catch on to that, too.
Do your best to set an example that promotes a healthy attitude about money, and your kids will be much more likely to have a positive relationship with money when they’re older.
2. Use a Clear Jar to Save Instead of a Piggy Bank
The classic piggy bank has always been a great idea for teaching kids about money. But giving them a powerful visual can drive the point home in a whole new way.
Swap out the piggy bank for a clear jar so your children can literally watch their money grow. They’ll experience the excitement of watching a jar that was once empty accumulate dollar bills, quarters, and more! Talk them through their progress enthusiastically and make it clear: wise money choices are a cause for celebration.
PRETEENS & YOUNGER TEENAGERS
1. Demonstrate the Concept of “Opportunity Cost”
At this stage, your kids are beginning to grasp the concept of scarcity and recognize that each time they make a choice, there are alternatives that are not chosen (a next-best alternative). The value of this next best alternative, they’ll soon understand, is the opportunity cost.
Opportunity cost can be related to decisions to save or spend their money, and choosing to save means giving up the opportunity to enjoy what they would’ve purchased. And vice versa.
What seems so intuitive to us as adults might just throw your kids for a loop, so for now it’s important to keep it simple. As the chance arises, talk them through their choices: “If you buy those shoes, then you won’t have the money to buy that game. Which will you choose, and why?”
2. Give Your Child an Allowance
Allowance for children is a controversial topic these days.
Some experts take the position that teenagers who receive regular, unconditional allowance will simply view it as an entitlement. Some even maintain this can lead to an underdeveloped sense of financial literacy, lower levels of motivation and a lack of motivation to work at all.
But others see the many benefits. Your children can learn to plan ahead, taking into account upcoming expenses. It also provides a safe space to make mistakes and feel the consequences of money mismanagement. It also allows parents to plan ahead and set aside money for their children on a regular basis.
3. Teach Them About Giving
Even when your kids have only accumulated a small amount of money, be sure you teach them about giving. It’s never too early. Let them choose the charity, church, or maybe even an individual they know who could use some help.
Soon it will be clear how giving doesn’t just affect the recipient – it positively impacts the givers as well. With a little luck, you’ve set them on course for a lifelong habit of giving.
FINANCIAL LITERACY FOR TEENAGERS
1. Teach Them How to Find a Job
Between winter, spring, summer, and fall breaks from school, your teenagers should have at least some free time. And if they need money as so many kids their own age do, jump in and help them find a job.
You could help them narrow down their fields of interest, guide them through the online search process or coach them on visiting businesses in person to see if they’re hiring. Preparing them to make a good impression at the interview is helpful, too.
It can be tempting, but make sure you don’t jump in and take over. The learning curve might be steep at times, but there’s simply no substitute for getting this done (for the most part) on their own.
2. Consider Giving Them a Bank Account
You should be able to set your kids up with a simple bank account, especially if you’ve already been implementing other ideas from this list along the way. Money management will become much more real, and it will prepare them for (hopefully) managing a larger account balance when they become an adult.
3. Be Clear About the Danger of Credit Cards
When your children turn 18, they’ll regularly be approached by credit card companies. The temptation to sign up for each one can be strong, especially if they’re a little strapped for cash. If you haven’t taught them why debt can often be a bad idea, they’ll quickly become another credit card victim. Now is the time to talk to them about debt if you haven’t already!
Equipping your kids to handle their money with wisdom and know-how is one of your most important responsibilities as a parent. Teach them well, and you’ll have the joy of standing back and watching with joy as they step out of the nest and fly on their own.