Financial Literacy for Kids: The Basic Principles
In today’s world, financial literacy for kids should not only be a subject for teachers to teach, parents must teach their kids too, as they say, charity begins from home.
Also, many adults and parents wish they were financially literate earlier than they did.
As a parent, you would want to mitigate this by teaching your child the value of money early enough. It is important that children understand the value of money as this will cart off some pressure on you as parents.
In fact, a study shows the relevance of this, teaching children the value of money increases their financial literacy level and also enhances the knowledge about money-related values and common money transactions.
There are several ways to help a child understand the value of money and below are some of them.
Let them understand the difference between a want and a need
Children usually have the “they want this” or “they need that” moment, especially when they are at a store or mall.
At this point, many parents struggle to help children understand why they may not need the item or it’s unaffordable.
To assuage such a situation, help them understand the difference between a want and a need. The understanding of this will help the children to avoid impulse buying in the long run.
Also, explain other reasons why items appeal to them and make them feel they need it, such as ads campaign from advertisers which are usually alluring and can easily convince individuals to buy what they don’t need.
Help them practice savings
This should be the bedrock of financial literacy for kids. The importance of teaching children how to save from their early stages cannot be overemphasized.
We are at a time when global consumer debt is at its highest level and one of the best ways to reduce that, is to teach the next generation the value of money and the importance of savings.
Get them piggy banks to start building their savings. Guide them to save every little dime they receive a gift, as well as help them set financial goals.
As parents, guide and monitor their savings habits. You can do this by checking the piggy bank once a month or once in two weeks to help them visualize their achievement and reaching their financial goals.
Help them understand the significance of compound interest
The earlier you expose your child to different investment opportunities, the better. By doing that, let your child understand the significance of long-term investing, which is compound interest. This understanding will not only help your child prepare for the future but also strengthen his financial education.
Teach your child the importance of a budget
Let your child understand what a budget means and why it is important. Having a budget and sticking with it will help your child to live within his means. It will also help him plan his finances effectively.
Help them to start making money themselves
Give your child the opportunity to work and earn some money or to become an entrepreneur.
This will further strengthen the child’s understanding of the value of money. Also, teach your child how to spend wisely by practicing with little of his income.
Teach them what debt is
Teaching your child what debt is will not only help your child live a debt-free life but also empower your child to effectively channel his financial resources to good use.
Let them understand that incurring debt should be a last resort in an extremely difficult situation where there is no alternative and should be paid back as soon as possible.
Also, except your child want to use the debt to start a viable business which he is confident of paying back the debt as soon as possible.
Read Also: Teach Your Kids About Money Like the Rich
Buy Books on Financial Literacy for Kids
Another important is that as you help your child in reading other books, get him books on personal finance. There are numerous good books on personal finance for kids such as finance 101 for kids and other ones.
The importance of financial literacy for kids is that the earlier you start teaching your child these principles, the better. Give them the opportunity to practice, they will learn and grow with the principles. Also, some of these can be equally useful to adults as well. It is important to assess how we plan our finances.
Which of these principles have you been teaching your child?. For the purpose of learning, what are the other principles not covered in this article that are equally significant?.