A Guide to Financial Literacy for Kids
When it comes to saving money and spending it wisely, you are never too young to start. The earlier in life children learn important financial lessons, the better off they will be as adults when it comes to their careers and their credit. Teaching financial literacy is an integral part of ensuring that future generations will be responsible with their money and be able to purchase the things in life that really matter, like a home or a new vehicle. Using real-life lessons can help kids discover what it means to earn money and save it for the things they really want.
For very young children, ages three to six, a piggy bank is an excellent starting point to show them the importance of saving. When the tooth fairy comes or Grandma gives them a bit of money for their birthday, encouraging them to put it in their piggy bank is a fun savings method that will help them to actually physically see where their money is going. Over time, they'll actually be able to witness the cash getting heavier and filling up the piggy bank, thus exhibiting the virtues of saving. As children get a bit older, allowances are a good way to show kids how hard work can pay off. Whether it's taking out the trash, doing the dishes, or cleaning their room, paying an allowance will show kids that you must earn money by working in order to gain it. Allowances can start when your child is approximately seven years old and can continue throughout their teenage years. This is a good economic lesson that can help pave the way for their future. When it comes to teens, getting them a bank account and debit card and encouraging them to get a summer job are great lessons for preparing them for adulthood and their financial well-being. Responsibility with money is the foundation for a more secure and stable lifestyle. Teenagers need to be able to do some things on their own, and having a bank account is an excellent place to start.
A valuable lesson for young children is to teach them that money is not always a renewable resource unless it is earned. For example, if your child wants to buy a toy with the money in their piggy bank and they have just enough, you can take them to the store and let them buy a special toy. If they decide they want two toys but do not have enough money, this is a good opportunity to show them that money must be spent wisely and that they'll only be able to buy the things they can afford. Let your children pay the cashier so they can really experience what it is like to pay for something with their own money. This will give them a sense of pride and accomplishment and exhibit to them that saving really does pay off. Have your child keep a notebook filled with the dollar amounts they've earned and teach them how to add and subtract whenever they earn or spend. This is a good starting point for showing them how to balance a checkbook in the future. It's also a great way to help them work on their math skills.
Paying an allowance is certainly an integral part of teaching children financial literacy. For very young children, create a wall chart that has their chores listed out for them and the amount of money they will get as they finish each chore. Keep the tasks simple for younger children, like making the bed or helping you with the dishes. Pay them a small amount, about 50 cents to a dollar per chore, and make sure they put their money away until at least the end of every week or even every month. A downside to giving kids an allowance is that they'll most likely want to spend it immediately on frivolous things like candy or toys. Instead, encourage them to save it for one large item or for a fun activity like going out for pizza with friends. As children get older, you can increase their chores to things like dusting, taking out the trash, or sweeping the kitchen floor. Increase their allowance in increments of a dollar or two for every chore they do or every new responsibility they receive. Make sure you stick to your guns when it comes to paying your child only for the chores they actually finish. This is a valuable lesson for their future in terms of getting a job and understanding that they must complete work in order to be paid. Over time, your child should be able to understand the importance of earning, saving, and spending wisely so that they will be prepared for their adulthood in terms of being financially responsible.
Lessons About Money and Finances
- Kids' Savings Calculator
- Teaching Children and Teens About Money
- Let's Go Shopping! Lesson Plan
- Three Money Lessons for Your Kids
- Real-Life Money Lessons
Teaching Financial Literacy
- Raising Financially Savvy Kids
- Choose to Save
- Reality Check for Teens
- The Power of the Piggy Bank
- Why Save? (PDF)