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Financial literacy should be taught from a very young age; it’s never too early to teach a child how to make sense of cents. Kids do not understand money the way adults do, money is still a very amorphous idea to them.
Children’s ignorance about money is an adult’s problem, we ought to teach them. Here’s a guide on how to nurture financial literacy in children during their crucial developmental years.
1. Teach Them How To Fish
No, we’re not talking about a literal trip to the lake, but the concept of teaching a child how to make money. Most children, especially older ones, expect a periodic stipend from their parents. While this is a noble idea, encouraging them to take up paying jobs is a more sustainable idea (unless they’re too busy with extracurriculars).
Let your teens look for available jobs and work part-time. That way, they’ll value the concept of working for your money.
2. Let Them Establish a Budget
A budget is a life-saving document, and most people adults still struggle with it. Make this discipline compulsory from childhood, and only buy what is in the budget.
Teach the kids how to prioritize needs from wants and how to only spend what they have.
3. Educate Them About Credit Cards
With their ease of spending money you don’t have, credit cards have brought many to ruin.
Teach kids the dangers of having a card that allows you to spend your money before you have it and how to be responsible with one if they ever get it. These days, you can even get your child their own “debit” card designed for this purpose of teaching.
4. Teach Them Saving Skills
Saving is a valuable practice as it prevents living paycheck to paycheck. Children can cultivate this habit by initiating purposeful saving from a young age. Encourage them to save for college or a specific item they desire, and this habit will endure throughout their lifetime.
5. Get Them A Bank Account
Having a bank account in their name is a significant responsibility, and rightfully so! When a child has their own savings account, it comes with the duty of making regular contributions each month.
Take a trip to the bank with the child and help them open a bank account. Having the manager discuss the various accounts and explain how each works is a whole lesson on its own.
6. Discourage Financial/Lifestyle Comparisons
Keeping up with the Joneses’ is detrimental to everyone, not just children. If kids grow up asking for things because their friends have them, you will soon have a grumbling, discontent adult.
Contentment is a great gain, and it’s best taught at home.
7. Don’t Encourage Impulse Buying
Taking the kids shopping can be a fun outing idea, but we’re all familiar with how it usually unfolds:
“I really want this!”
We ended up buying stuff for them that was not in the budget because we didn’t want a meltdown or a long face. Impulse buying is one financial mistake that kids have to learn. They should not see us do this, and they, too, should be expected not to buy things without prior plans.
8. Let Them Earn Their Allowances
To give or not to give children allowances, that is the question. Many parents believe in a periodic stipend, but what are they being paid for again?
The best practice is to help the children earn their keep by doing chores and getting a commission from them.
This helps the kids know that money is earned and not just given, and it definitely doesn’t grow on trees.
9. Model Generosity
Giving must be an integral part of financial literacy teaching for kids. Teaching them to give to the less fortunate in society is a key pillar in their lives.
Go with them to a children’s home or a shelter, and let them see you give back. That’s one way to bring up a great philanthropist.
10. Show, Don’t Tell
Five, ten, or a hundred dollars might not hold much significance for a child; they are just random numbers. To instill an understanding of the value of money, demonstrate to them what each amount can purchase.
When they carry a certain amount and realize it can’t cover the cost of a particular item, encourage them to make the decision to either put it back and choose something within their budget or save for a future purchase.
11. Save At Home As Well
Saving money at home in a piggy bank is great, and it’s even better when that piggy bank is transparent.
The kids get motivated when they can see the money physically growing, and it fosters good saving ideals.
12. Stay Away From Unnecessary Borrowing
Loans are one of the biggest traps that most people can’t seem to unstick themselves from. From student loans to mortgages, shylocks, and everything in between, loans have become modern-day’s necessary evil.
They can be avoided, and the younger generation has to be advised accordingly.
Teach them to stay away from debt as much as they can.
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