4 Tips for Raising Financially Literate Kids
When it comes to parenting, families have different styles, values, and traditions. However, most parents share a common goal. They want their children to grow up to be healthy, happy, independent adults. As a parent or grandparent, teaching fiscal responsibility is one of the most important ways you can help foster that independence as well as overall well-being. And since April is National Financial Literacy month, this is a great time to ensure your children are on the right path to a confident financial future.
So, where do you begin? Fortunately, teaching kids about basic financial principles doesn’t require special training or a degree in finance. It starts with the behaviors you model every day, from the importance you place on budgeting and keeping discretionary spending in check, to what you choose to splurge on, and your values when it comes to charitable giving. To get started on your family’s journey, consider the following tips.
1. Talk about it.
While money helps your family accomplish many different goals, it can also be a source of deep emotions, conflict and anxiety. To help children develop positive attitudes about money, begin by sharing your own experiences with money. For example, explain how saving money helped you buy a car, pay for college, purchase your home, or pay for a family vacation. Talk about your values around spending and debt, and why you choose to contribute money to certain charitable organizations or causes.
Talking about money helps children of all ages learn about and embrace the important role it plays in supporting your family’s goals. As appropriate, consider including kids in family meetings about budgeting and spending to help them understand that everyone has a role to play in keeping household finances on track. Encourage them to ask questions and share their thoughts and ideas. This can help children develop greater respect for how money is earned and how it is used within your household. It also conveys valuable lessons about saving, goal setting and trade-offs.
2. Start early.
The sooner children begin to learn about the important role money plays in life, the more likely they will develop a positive and healthy relationship with it. Even very young children can master three basic principles: saving, giving and spending. To help children visualize how money can be used to accomplish these different goals, consider the “bucket” method. Set up three containers, these could be piggy banks, envelopes, or recycled food containers. When children receive money for completing chores or from grandparents, allow them to make decisions about how much they will save, give to others, and spend on themselves. Consider rewarding the behaviors you want to foster by occasionally adding a small bonus or matching contribution to that bucket.
3. Encourage negotiation.
When it comes to parenting, some things are not negotiable, such as requiring small children to hold hands while crossing the street, or older children to adhere to curfews. (Broccoli consumption, on the other hand, falls into some vague middle ground.) However, money—by its very nature—is negotiable. Teaching children how to negotiate not only helps them master basic budgeting principles, but better prepares them for the real world, where they will eventually be spending their own hard-earned money instead of yours.
An allowance can provide a great starting point for teaching important negotiation skills. Before deciding on an allowance, ask kids for their input in placing a value on different chores or tasks. This not only provides them a voice it also helps them understand the relationship between work and earnings. Keep in mind, an allowance doesn’t have to involve cash. Feel free to get creative. Many families use a point system where kids can trade points earned for a trip to the park or the ice cream shop, the ability to stay up an hour later on the weekend, or a free pass on certain chores.
4. Embrace technology.
Learning money management basics doesn’t have to be boring, thanks to a broad range of age-appropriate websites, games, tools and mobile apps available to children of all age groups. Begin by checking out the following to find the interactive resources that work best for your family.
If you have questions or concerns about saving, budgeting or managing family finances, call the office to schedule time to talk.
This information was written by Katie Williams, a non-affiliate of the Broker/Dealer.