Financial literacy is dangerously low in this country. Indeed, a huge number of grown adults don’t know the first thing about budgeting, debt, credit, or how to plan for their financial future. Indeed, nearly half of all adults don’t know their own tax bracket. Obviously, it’s never too late to learn how to manage your finances. At the same time, though, parents of young children can and should take the initiative to educate their kids about spending and saving money. Simply imparting a few key financial lessons could help your little one avoid some big headaches once they’re all grown up. To that end, here are four tips parents can use to teach kids about money:
Keep it Simple
Obviously, it’s easy to overwhelm a small child with confusing financial terminology. Most kids aren’t going to sit and listen attentively while you explain what a fixed-rate mortgage is. However, parents shouldn’t be afraid to explain basic financial concepts to children like banking, credit, and debt.
Use Real-World Examples
Kids can sometimes have a difficult time grasping abstract concepts. After all, what does “debt” mean to a ten-year old? If at all possible, use real-world examples to explain these more advanced terms. For instance, parents can show how businesses save money by purchasing items like barricades in a single payment –– as opposed to spreading payments out over time. Additionally, you may want to invite your kids to review a financial document or two with you. Just letting them watch you fill out your taxes can help them understand the process in a more concrete way.
Reward Smart Choices
Giving your child autonomy to make financial decisions on their own can be nerve-wracking to say the least. After all, few parents would let their fifteen-year old loose in the mall with a credit card at their disposal! However, parents can give their child a small taste of financial freedom –– $10 here, $20 there –– and reward them for making smart decisions with their limited funds. By exposing your child to budgeting early on, you can help them develop positive spending habits and learn about the benefits of using banks and accumulating interest.
Encourage their Work Ethic
A little hard work never hurt anyone. In fact, one of the best things that a parent can do for their child is to help them build up a strong work ethic. Of course, all parents want to give their kids material gifts and to spoil them, in a way. Yet, it’s okay to make your child earn their allowance through chores around the house. This will teach them the value of a dollar so that they don’t take money for granted down the line.