When it comes to finances, it’s never too late to teach your kids about the importance of money management and savings. It’s been known that children learn at a rapid pace in their early years, and financial literacy is one of the skills that should be taught to kids early on.
Investing in your kids’ future isn’t just about making sure they receive a great education or have successful careers, but it’s also about how they should invest financially to ensure that they’ll have money not just for the present but for the future.
Below are four easy ways to teach kids about money management and financial literacy:
1. Take advantage of the piggy bank.
Growing up, many kids had piggy banks in their room whether it was for the purpose of actually saving their coins or just for decoration. Now that I’m in my early 20s, I realized the importance of the piggy bank during my pre-teen to teenage years. Although we all think that pennies, nickels and dimes are worthless, we forget to realize that those coins add up. It doesn't take that much for an accumulation coins to reach a dollar. It’s essential to teach kids that whether they have a penny or a $20 bill each type of currency is worth substance. It also teaches kids the importance of saving and gives them the visual representation of witnessing their money build. It’s a great feeling once you witness it.
2. Teach kids how to work off commission.
It’s never too early to start your kids off doing chores and establishing their work ethic. If you grew up in a similar household that I grew up in, there’s plenty of chores to do around the house. Some chores include taking out the trash, mowing the lawn, washing dishes, raking up leaves and washing dishes. With all five chores if you get paid $5 for each, you’ll already have $25. It’s important to teach kids that hard work is not given, but earned. It’ll also show them that hard work pays off.
3. Show kids the reality of purchasing items.
The best way to learn is through real-life experiences. One way to show kids the importance of managing money and deciding when to spend it is taking them to the store to purchase items with their own money. Those days of kids getting mad about not getting fast food on the way home or getting those extra snacks from the grocery store will be long gone once they have to pay for it on their own. They’ll realize that that happy meal wasn’t worth those $3 to $5, and could’ve used it towards items more important like clothes. It just takes that one trip to learn that lesson.
4. Set up a bank account for your teen.
Kids should learn responsibility early on and having a bank account can teach them how to be responsible with their money. Setting up a bank account can be one of the most effective ways to teach your older child about money management. That’s when they’ll be able to learn the difference between a savings and a checking account. It’ll also teach them how to save money. One important lesson you can teach your kids, is based off the amount of money they are paid, take 10% of it and transfer it to their savings account. But be careful, now that they will have access to a debit card, it may be harder for them to keep track of their money and influence them to continue to swipe their card without really knowing how much money they have in their account. If this concern may arise, make sure to have access to their account to help manage their accounts.
As you can tell from the points above, money management is very important for kids to learn as early as possible. Actually, during the holidays is probably the best time to teach them about how to handle their finances. Especially when their aunties, uncles, and grandparents are giving them money. Once they’ll learn the significance of how to manage the money that they do have, they’ll start to become more frugal and stop spending frivolously.