Financial Literacy Lessons for Your Kids
Financial Literacy Month (also known as National Financial Capability Month) is an annual event taking place in April, centered on improving Americans’ understanding of financial principles and practices.
Given how important financial skills are to navigating life, it’s surprising that our schools don’t teach children about money, starting at a young age.
Beth Kobliner, author of the New York Times bestseller Get a Financial Life, and a member of the President’s Advisory Council on Financial Capability says children as young as three years old can grasp financial concepts like saving and spending.
And a report by researchers at the University of Cambridge revealed that kids’ money habits are formed by age seven.
Given this information, there are some basic financial lessons that can be taught to our children that will be of great use to them as they grow.
Lesson 1: It can wait
“I want it. I want it now!” This sounds like a child aged 3-5. It could also accurately describe the behavior of some adults who never learned this lesson.
Instant gratification is something that kills the lesson of saving up to buy something that you really want. Kids will learn fairly rapidly that if you walk into any store, it doesn’t necessarily mean that they are going to get a toy out of the visit. And if they see something that they absolutely fall in love with, then try this approach--“Ok well I can see you really like that toy. It’ll still be here when we’ve saved up for it next week.”
Lesson 2: Make good choices with your money
As your children grow to about 6-8, they’ll need to wrap their heads around the age-old “money doesn’t grow on trees” concept. Money is finite, and it is important to make wise choices of how you manage, save, and spend your money.
This also translates into teaching your children that once they spend the money they have, they will have to earn more. In other words, they can’t buy on credit.
Lesson 3: Saving and interest
At around ages 11-13, children’s financial education can shift from short-term saving goals to more long-term savings goals. They have high school and then college ahead of them. Introducing the idea of a savings account and compound interest (when you earn interest on your savings, as well as on past interest from your savings) would be a good thing to teach them.
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