How to teach Financial literacy to kids
You want your child to grow up confident and capable, and that includes knowing how to manage money. If you’re like most parents, you probably didn’t get much financial guidance yourself growing up. In this article we dive into Financial literacy for kids. You’ll find age appropriate financial lessons and real world activities you can use at home,
So, where do you start? And what’s the right age to begin teaching your kid financial literacy?
The truth is, it’s never too early (or too late) to begin teaching your child about money. From helping young kids understand spending choices at the store to preparing teens for credit cards and budgeting for college. Every stage offers opportunities to build lifelong money skills.
Ages 0+: normalize money in everyday life
Make finances a normal part of everyday life
From an early age, don’t hide day to day financial activities from your kids. Make opening and paying bills a normal and regular occurrence. Budget in front of them, maybe listen to a financial podcast in the car. They might not understand it yet, but early exposure helps normalize talking about money.
Ages 6+: hands-on budgeting and smart spending
Involve them in grocery shopping
An easy thing you can do with school age kids is to involve them with grocery shopping. Encourage them to make their own grocery list within a predetermined budget. Let your kid compare prices between brands. Make them wonder why one brand is more expensive than the other. Find coupons and discuss tradeoffs.
Sticking to a budget, doing research and comparing prices teaches them an important lesson in daily expenses. It also teaches them to do their research on getting the best bang for their buck.
Debit card
Consider giving your child a kids debit card, you can fund the card with their allowance, and they can manage their own money. They’ll learn how to set money aside in a savings account.
By developing a routine of saving a portion of their money they will learn about short term and long term saving. It’s an important lesson and a skill they will be happy to have developed by the time they are young adults.
Ages 13+: credit, saving & responsibility
Credit cards
Your child can get their own credit card when they turn 18. However, a few bad choices can have long lasting effects on their financial health. It’s important to prepare them properly.
Before they turn 18 you can make them an authorized user on your credit card.
As the primary cardholder, you’re responsible for charges your child makes. It’s important to lay down the rules for use. Set a clear budget and monitor spending together. Get in the habit of involving your child in getting the credit card paid every month.
By being an authorized user your kid will build a credit history early on. Having a good credit rating can help them in the future. A good credit score can help them qualify for better terms on credit cards, loans and rental applications. Keep in mind that both you and your child will have to be responsible with the credit card. You can hurt your child’s credit score if you’re irresponsible yourself and vice versa.
Set them up for retirement
You can never start saving too early for retirement! Get them used to setting money aside for their retirement as soon as they get their first job. A Roth IRA is a good option. Roth IRA’s are funded with after tax dollars, but withdrawals in retirement can be entirely tax-free.
Get them used to making frequent contributions to their retirement fund. They will be in better shape than most of their peers in no time. Seeing their account grow early on will make it easier for them to stick to it.
Help them budget
Before your child heads off to college, they should know what to expect when it comes to household expenses, and all the extra expenses that come with college.
Involve them in the family household budgeting so they have a clear idea of what things cost and what they can expect.
Help them do research on what expenses they will encounter as a college student, and develop a realistic budget with your child that will help them avoid debt while still being able to enjoy college life.
18+: real-world financial independence
Let them know they’re not alone
While your kid is becoming a financially responsible adult, you might need to step in every once in a while to get them back on track. It’s important your child is comfortable enough to talk finances with you to ask you for help when they need it.
Encourage them to find trusted professionals for financial help
Being financially literate, and having a trusted source for advice like a financial advisor, will make a massive impact on your child’s financial health and their future wealth.
Start today. Pick one idea from this list and try it this week. The sooner you start talking about money with your child, the easier the financial conversations will be in the future.