Learning how to earn, save and spend money responsibly is one of life’s most important core skills and yet many kids grow up without any formal education around this important subject. If you want to give your children the tools to manage their own finances then you may have to take action yourself – here are some pointers to get things going.
Allowance
There are few better ways to teach kids the value of money than by giving them some to handle. A weekly allowance can teach important lessons to do with saving, spending, and long-term investment. You may even find it’s a good idea to help them open a youth savings account – these are often operated via joint ownership so you can keep track and set a minimum balance limit. If you’re unsure of how much to give per week/month, check online to see what the experts recommend.
Some parents find it’s a good idea to encourage their kids to ‘earn’ allowance. This means carrying out simple tasks or chores such as sweeping leaves, washing the car, tidying their rooms or finishing homework. It’s important to note, however, that although these kinds of strategies help a child to find a relationship between work & reward, they may also create false expectations between tasks (that should be carried out regardless) and financial remuneration.
Shadowing
Leading by example is crucial for teaching kids about the processes of spending and saving money. If directly communicating key information doesn’t work, it’s often worth bringing them along to the bank so they can see how things work first-hand – practical demonstrations can appeal to different learning styles and you’ll have the expertise of on-site staff to help you navigate any complicated questions.
Loans
One of the more challenging concepts for a lot of children is that of loans. Although it can be tricky trying to comprehend borrowing, interest rates, and defaulting, loans are a vital component of the financial process and should be explained early on. If you’re wondering how to put this concept across, you could try ‘loaning’ your child some allowance upfront and request that they pay it back over time.
Alternatively, you could try giving some examples. The process of homeownership can be used as an instance in which loans are commonly required – you could even try going online and researching available mortgage types, whether conventional, FHA, or VA loans, as well as 15- vs. 30-year mortgage refinance rates.
Online Teaching
Often, hands-on teaching is better than time spent learning independently but there are plenty of resources available online for kids who prefer to learn on their own. For video content, explore the various channels on Youtube, where you can find informational animations for kids aged 5+ to do with types of money or even live-action series about spending that are more suitable for middle-schoolers.
There are also interactive platforms that allow your kids to engage with the learning process directly – these often take the form of games or puzzles, with activities aimed at any age from K-5 to high school.
Raising financially literate kids is not always an easy feat, especially when there are so many other distractions. Fortunately, there are plenty of available resources to help you help your child and, if you can find one that resonates, they’ll be sure to learn quickly.
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