How to Teach your Child The Basics of Finance

Financial literacy is still one of the least discussed subjects for many kids today, and it really shouldn’t be underrated, as children need to learn early enough how to be independent. Children need to know and understand the skills needed to manage money effectively, and this will only happen if you put in the work to ensure they learn.

Many adults find it difficult to talk to kids about money, how it should be spent and all that they need to know. This can be due to a wide range of reasons, ranging from not having adequate knowledge themselves about finance, to how they probably mishandle their own finances. These could seem like enough reasons to shy away from teaching kids the basics but is definitely not the best option. Kids need to learn, so they don’t become adults who can’t manage their finances. If it means getting your financial life in order first, then go ahead and do just that.

Your kids will grow up and have to deal with finances for the rest of their lives, which is why the knowledge of finance shouldn’t be taken lightly. Not all schools have fully integrated finance topics into their syllabus, so there’s still a long way to go in teaching kids as a parent or as a guardian. Here are the steps you need to follow:

1. Begin With Yourself

If you will be teaching your kid about finance, it is important that you also have adequate knowledge about it yourself. You need to be a great role model to your kid, and it makes it even easier for them to follow the right path when they see you doing same.

• Start by learning all that is there to. Read books and take financial courses if you have to.
• Monitor how you spend. If you go after every new technology gadget and ignore basic needs at home, it will be difficult to explain to your child why they should prioritize and go for the needful first.
• Learn how to save from every income, and work with a budget.
• Be open about your finance, and not keep it a secret from them. This will help them learn important financial lessons.

2. Use Money Milestones

• Age 2-5 (Toddlers): 

You need to introduce your kids to money at this age, by making them understand first that you buy everything with money; nothing falls from the sky. Toddlers will always cry and forcefully demand some things, and the earlier you let them know it can’t always be possible, the better. Other ways to introduce them to this concept are by letting them learn how to count with currency notes, making little donations or even owning a piggy bank.

• Age 6-10 (Elementary school)

This is the core age to start introducing them properly into the importance of earnings, expenses, and savings. Let them know about banks, and you can even go ahead to open a savings account for kids, where they can slowly grow their finances. You can give them little allowances each week, so they have something to save, and also every time they get monetary gifts. Go with them to markets to price things and see how much you spend on a particular item or their favorite toy. You can also send them on errands, so they can familiarize themselves with price tags, wants and needs.

• Age 11-18 (Pre-teens and Teenagers)

Now is the time to give it your best shot, because they will hit adulthood after this with whatever foundation has been laid. Teach them how to earn money legally and also save more. Let them learn how to create their own budget and try hands-on jobs like babysitting, mow lawns or get little pay from extra house chores. If they are in college, let them know how much college costs and how savings could help them in the long run.

How to Arm your Children With Basic Financial Skills:

1. Make it fun

Now that you will be introducing basic finance lessons to your kids, you sure don’t want to bore them with tales. Try to make it fun while at it, especially for toddlers and elementary school kids, to get them interested to learn and do even more. You can search for budgeting games online or game apps that will help them learn about finance while playing. You can also encourage them to save more by promising to give them a particular amount after hitting a milestone, or a percentage of what has been saved.

2. Teach them how to set smart goals

Teach your kids how to set financial goals, like creating milestones on what to earn and save at any given point in time. You can also encourage them to save towards a particular cause. With this, they will have a budget to work towards and will constantly look forward to hitting it and getting whatever it is they wanted. Goal setting will help them to be more focused and even more successful. If they succeed at learning this and implementing it effectively, it will help them greatly in the future.

3. Teach them to spend and save wisely

Without learning how to spend or save, your kid will easily squander money and get you frustrated in the long run. Introduce them to budgets and scales of preference, where they list important needs first, then down to wants. You can also let them realize how much work would be required to raise a particular amount of money and why they should reconsider squandering it on what’s not worth it. Also, have them keep a record of their expenses. On saving, you can get them a piggy bank or open a bank account for them and encourage them to save often.

4. Encourage giving back

Teach your kids not just to save but also to be kind to others with what they have been able to save. Let them learn to give out of what they have and not just hoard it to themselves. They can start by donating toys or clothes to the needy and giving a little money towards charitable causes. These are habits that should grow with them.

5. Start teaching them how to invest

Teach basic investment skills as they grow. Start by letting them know what it means to invest, then let them see practical examples of things you’ve invested in. As they grow older, they will understand how important it is and will someday also invest.

Financial literacy should be taught as early as possible, to set a proper financial foundation that will help in the future.