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14 Smart Ways to Boost Kids’ Financially Literacy at a Young Age

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Financial literacy is a valuable life skill that should be taught from a very young age. It’s never too early to teach a child how to make sense of cents. Many parents leave money discussions off the table, keeping kids in the dark as they grow up.

To kids, money is still a very amorphous idea. They need guidance and real-life experiences to begin to grasp how money makes the world go around.

Children’s ignorance about money is an adult’s problem, especially as they become teens and young adults. Since Spending and Financing 101 is not a class in most high schools, it falls on the parents to guide them.

Here are ways to nurture financial literacy in children during their crucial developmental years, helping set them up for success as they go out on their own.

1. Teach Them How To Fish

Father fishing with his son
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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 or allowance 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. Alternately, you can teach teens (and even younger) the importance of helping with value-derived tasks. For example, while certain chores may be expected as part of a family contribution, you might provide your kids with additional money-earning opportunities you’d have to pay someone else to do anyway. Think lawn maintenance, deep cleaning, etc. That way, they’ll value the concept of working for their money.

2. Let Them Establish a Budget

Two boys counting money and making notes
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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 spend only what they have. If you do give them an allowance, teach them how to save up for big purchases, decide what’s worth splurging on, and live within their means without going broke. Teens can even get debit cards with gamified spending and savings apps to help them learn how to spend and budget responsibly.

3. Educate Them About Credit Cards

Excited Woman Eyeglasses Using Smartphone Credit Card
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With their ease of spending money you don’t have, credit cards have brought many to ruin. As kids, it’s hard to grasp how using a credit card works and that it isn’t just “play” money.

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. Understanding how debt works and how interest works can make all the difference for old kids. As mentioned, these days, you can even get your child their own “debit” card designed for this purpose of teaching.

4. Teach Them Saving Skills

piggy bank mom and daughter saving money
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Saving is a valuable practice as it prevents living paycheck to paycheck, always fearing financial ruin if something breaks or someone gets sick. 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

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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 and Lifestyle Comparisons

Children sitting in the cart pushed by parents
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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 struggling to live within their means.

Contentment is a great gain, and it’s best taught at home. Teach them the power of gratitude and the important things in life, like time together. Comparison is the thief of joy, help them find all those beautiful little moments to appreciate.

7. Don’t Encourage Impulse Buying

Happy girl holds a cart and selects products home
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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.

Explain to them the importance of thinking a purchase through and deciding if it’s worth it.

8. Let Them Earn Their Allowances

little boy selling lemonade for money
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We’ve talked briefly about allowances, but let’s go deeper.

The question is whether or not to give children allowances. Many parents believe in a periodic stipend, but what are they being paid for again? For many parents, 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. If you don’t want to pay your kids for their expected chores, help them brainstorm other ways to make money on their own- like shoveling driveways, selling crafts, or baking goodies.

9. Model Generosity

Little girl gives money to the beggar
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The art of giving should 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. It’ll boost their sense of self-worth and help them make a difference.

You can do this by setting a good example. 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

Mother and daughter in supermarket
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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. It’ll help their little brains start to conceptualize the true value of money and what it can buy.

11. Save At Home As Well

Happy Family saving money
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Outside of the bank, 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.

However, at some point, you might want to explain inflation to them since the money in the piggy bank is slowly losing its value.

12. Stay Away From Unnecessary Borrowing

Jobless woman having no money in her purse
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Loans are one of the biggest traps that most people can’t seem to unstick themselves from. From student loans to mortgages and everything in between, loans have become modern-day’s necessary evil.

They can be avoided, and the younger generation must be advised accordingly. Teach them to avoid debt as much as possible unless they use it to leverage something at a low-interest rate.

13. Price Comparisons

cute baby boy with money
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Learning to shop for the best prices rather than absent-mindedly grabbing items on a shopping list can help kids learn to save money from a young age. You can also teach them the value of buying used or upcycling certain items, such as clothing or sports equipment, which can literally save them (and you) hundreds in the long run.

For example, do they want to buy one new t-shirt at Target for $10? Or go to the local thrift store and buy 3 to 5 gently used shirts? Even the youngest of kids understand that math!

14. The Power of Compound Interest

Happy parent helping their son for homework
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Finally, it’s never too late to teach your child about the power of investment and compound interest. When they’re little, a small amount of money in the right account can grow into something that’ll help them get ahead later in life (college, first house, etc.).

Once they witness firsthand its power, they’ll continue making smart investments for the rest of their lives!


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