As a father of two children and an educator, I have seen firsthand how your family's money attitude and communication affect the future of your family. Hence, instilling financial literacy in your kids is very important. How you discuss money, how you feel about it, and what you say about it have a lasting effect on future generations. Money disputes are one of the primary causes of conflicts and even divorce. Your children's lack of financial knowledge will leave them vulnerable for their financial future. This article will therefore help you overcome the taboo surrounding money discussions in your family.
Besides planning for our child's education fund, we parents need to help our kids to be financially literate as well. Many parents were raised in a culture where discussing money was inappropriate or forbidden. However, this mentality is counterproductive. Children who are shielded from discussions about money develop ignorance or, worse, aversion to making financial decisions. This frequently results in poor financial decisions, leading to personal financial insecurity, tension, and numerous long-term financial struggles.
7 Ways How To Build Financial Literacy In Your Kids
It is crucial to begin teaching your children about money at an early age if you want them to be financially secure. Here are some of the methods I've taught my 2 rambunctious children about money:
1. Open Savings Account For Your Kids
Your children will learn the fundamentals of responsible financial management through this fun and engaging activity. They can learn how to add and remove funds from their account, maintain a positive balance, and make responsible use of their debit card. Once your children reach the age of 7, you should consider establishing a savings account for them if you have not.
2. Pay Your Kids To Read Books on Financial Literacy
Yes! You read that right. You can pay your kids to read books on financial literacy. In order to help your children develop their financial literacy, you should encourage them to study books about personal finance and goal-setting. After they have finished reading the book, you should reward them for their efforts by having them compose a one-page summary or create a personal movie outlining what they have gained from reading the book. Reading and writing will become easier for them, and they will also gain knowledge about how to budget their money if they do this.
3. Stop Giving Out Weekly Allowances Easily
The previous method of paying your kids to read financial literacy books augments this third method really well. Stop giving our weekly allowance easily to your kids. In fact, your kids should earn their own pocket money. Allowances should not be given out simply because another week has passed and your children are still alive. What exactly are they learning from that? Instead, you should consider paying your children for "extra" labour that they do around the house. This has the potential to instil in them the importance of laborious effort and the connection between labour and monetary gain.
4. Educate Your Kids on How To Save and Spend
Inspire your children to set aside a significant portion of their earnings for savings and to give to charitable causes. We have instilled in our children the values of saving or investing at least 30% of their pocket money, making charitable contributions of 20%, and using the remaining 50% of their allowance or "hard-earned income" for their own discretionary purchases such as going to the movies, buying clothes, or shopping. This philosophy of disciplined saving, investing, and giving cultivates a mentality of abundance and will instil in them healthy financial habits for the future.
5. Let Your Kids Take Part in Your Purchases
It is highly recommended that you let your kids be involved in the planning process of big purchases in your family. Involving your children in the planning process for large purchases such as a home, a vehicle, or a family holiday can give them a sense of responsibility and make them feel more invested in your family's financial well-being. For instance, when planning a family holiday, you can include your children in the cash flow planning process and discuss how much money will be allocated for transportation, lodging, food and activities.
6. Tell Them About The Cost of Everything
When you go grocery shopping, discuss the prices of items and the amount of money you are spending. This can help your children comprehend the true value of money and the actual cost of items. Describe how you worked hard and planned to have enough money to purchase your family's groceries.
By discussing money openly with your children, you assist them in developing a healthy and responsible relationship with money. They will be better able to make prudent financial judgements, manage their own finances, and ultimately reach their financial objectives.
7. Let Them Know Your Financial Goals and Plans
Last but not least, include your children in conversations about money to share with them the objectives and strategies you have set for your own financial future. Because of this, it may be easier for them to comprehend the significance of goal-setting as well as the process of formulating strategies to realise those objectives.
For instance, if you are putting money aside for a down payment on a house, you can involve your children in the process by having a conversation about how much money you need to save, how long it will take, and what actions you will take to accomplish your objective. They will have the feeling of being included and even more of a commitment to assisting your family in achieving your objectives, and perhaps they will contribute in their own manner.
Conclusion
It is never too early to start building financial literacy in your kids. In fact, the sooner it is the better it will be for your little ones. Then again, it is never too late. Raising money-smart kids is an important goal for many parents. Teaching kids the value of financial literacy helps them understand money and the power of saving and investing in their future. Being financially literate can open a world of opportunities for children, such as learning how to budget and manage their spending. It can also help them develop an understanding of how taxes, investments, and allowances work.
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