Financial education begins at an early age. And though formal finance classes are not part of the school curriculum for most kids; smart parents understand the value of teaching their children the ins and outs of finance, budgeting and investing. Of course, you may be getting ahead of yourself teaching toddlers about isas and pensions, but general financial understanding is essential – even for youngsters.
Kids develop at their own pace, so financial education takes many forms. The idea is to engage children over topics like money management, cash handling, and the importance of saving. Adults committed to passing financial lessons to kids use practical education, like allowing kids to make their own change at the store, for instance. But there is also a theoretical aspect to the process, which embeds valuable personal finance principles during childhood. Letting kids learn their own lessons, on the other hand, runs the risk of setting-in the wrong ideas about money, which can haunt them for a lifetime.
The first step toward informing children is to take financial education seriously. Just as you convey tenets of safety and etiquette, you must commit to passing sound financial understanding to your kids. Use the following ideas to reinforce your efforts, customizing your approach as the little ones catch on.
Show Them the Way
Financial education is a lifelong process, so passing information to the next generation actually keeps your skills sharp. Start by putting your best foot forward, illustrating your own commitment to sound financial strategies. Stay positive about money, and kids’ attitudes will develop into healthy financial management philosophies.
In addition to witnessing good behavior, children want to get involved. To furnish understanding about saving, planning and finding value within your budget, allow kids to participate in the family cash flow. Trips to market, for example, provide lessons for kids, who begin to understand the relationship between the items on the shopping list and the money required to buy them. The bank is another learning ground for kids curious about money. Satisfy their questions with a trip to the bank and once they’ve reached an appropriate age, open an account with them, to establish direct financial dealings with the branch.
Cash handling is obviously an important skill, yet it tends to be taken for granted. To ensure children know how to conduct basic transactions, take care to use cash in their presence, rather than credit cards. Once they grasp the direct relationship between cash and commodities, they’ll be better able to comprehend the notion of revolving credit.
Give Them a Stake in the Game
Each level of financial education provides a new reality check for kids learning about money. A watershed moment occurs when kids actually have money to manage. Giving them an allowance sets the stage for a number of important questions. Where will I put the money? What will I spend the money on? How can I get more? Coming to terms with these and other financial concerns helps kids form the bedrock principles that guide them throughout their lives.
Like adults with finite resources, kids with allowances learn to budget and save for the things they want to buy. And as kids’ appetites grow, some parents provide opportunities for them to complete work around the house for additional cash. Not only do they learn lessons about earning, but the process also reinforces kids’ early work ethic.
Keep up With Financial Technology
Children are growing up in a different world them you did, so it is important to account for changes as you educate kids about money. As mentioned on Readies, technology has changed the way financial relationships are conducted, so children need exposure to cutting edge practices.
Young kids benefit from direct, hands-on money handling and physical attention to financial matters, but as they age appropriately, virtual banking and other modern approaches should be shared. Some of the same apps adults find helpful can be used to show kids the advantages and shortfalls of financial technology. Ultimately, teens with jobs will be exposed to direct deposit. And by maintaining their own accounts, will begin building their own credit profiles.
Financial understanding unfolds at a unique pace for each child. By exposing kids to their own sound financial practices, parents reinforce good behavior, giving kids the tools they need to succeed. Once they have their own money to manage, children begin playing for keeps. So with technology to assist them, well-informed kids are prepared to face their financial futures.