Raising Money-Smart Kids: How to Teach Your Children Financial Literacy
One of the most important life skills you can pass on to your kids is financial literacy and the value of saving money. It can be tough to know when to get started with those skills though. Research shows that kids develop most of their money habits by age 9, so the earlier you instill good money habits, the better! Well, fear not! I've got some fantastic tips and real-life examples to share with you today that will make teaching financial literacy feel like a breeze. So, let's dive in and equip our kids with the money smarts they'll thank us for later!
Money Jars for Goal-Oriented Saving
Most small children understand money equals “instant gratification to what I want.” Saving may go against their initial instincts, but that can be taught! Having a money jar to keep track of savings and watch it grow can be a great way for them to learn the value of saving their money.
Get some clear money jars and label them with specific goals—like "Toy Fund," "Charity Giving," and "Rainy Day Savings." As they see their jars fill up, they experience a sense of accomplishment and responsibility. Studies have shown that kids who use money jars to save for specific goals are more likely to make thoughtful spending decisions and develop a sense of delayed gratification. Encourage your little ones to divide their allowance or gift money into these jars, and watch them learn the value of budgeting and saving for something they truly desire.
Give Commission, Not Allowance
Many families allow their kids to start their own savings by offering a weekly allowance. Although it’s great to have kids begin accruing some real cash so they can learn how to use it, simply getting that cash for existing misses the valuable lesson of earning what you make. Instead of giving your children an allowance for nothing, try assigning age-appropriate tasks to help around the house and giving them commission on their “work.” That way they can earn their money, and are even in control of how much they earn. Something simple like vacuuming the living room, or putting the dishes away can suddenly be an exciting task for them to earn commissions from. The more they do, the more they earn. If your children want to earn more money, they can find more tasks to do and negotiate a commission for the task. It’s a fantastic early lesson for them to work hard for their income and will set up a positive, conscientious mind set for their future careers.
Grocery Store Adventures
Next time you head to the grocery store, turn it into a fun and educational experience for your kids. Give them a small amount of money and let them make choices about purchasing a treat or a healthy snack. Show them how to compare prices, read labels, and make mindful decisions. They only have a certain amount of money, so they have to make tough choices about what they want to spend it on. Research suggests that involving kids in grocery shopping helps them become more price-conscious and mindful consumers. Some families opt to give the children a monthly budget to choose their own toiletries (“Should I get the fancy shampoo? Or the one that’s on sale?”). Others allow their kids to choose their own packable snacks for their lunches (“The pretzels are on sale, but I really want those fruit snacks that are $2 more”). As they participate in these real-life money decisions, they become more aware of the importance of making informed choices, and they feel a sense of responsibility for their spending habits.
The Lemonade Stand Entrepreneur
Who hasn’t tried that age-old Lemonade Stand on a hot summer day? Encourage your kids to set up their own mini-business and sell lemonade or homemade treats. Let them decide on the pricing, handle transactions, and interact with customers. Running their own stand provides an opportunity for kids to learn about profits, expenses, and customer service. They get to experience the joy of earning money through their own efforts and learn that financial success comes from providing value to others. Not only is this a fun activity, but it also introduces them to the basics of entrepreneurship and the value of hard work.
The "Save, Spend, Share" Rule
Teaching kids about money isn't just about saving—it's also about giving back to the community. Implement the "Save, Spend, Share" rule by dividing their allowance or gift money into these three categories. The "Save" portion goes to their savings jar, "Spend" is for buying things they want or need, and "Share" is for giving to a cause or charity of their choice. Studies have shown that the "Save, Spend, Share" approach helps children develop a sense of empathy and generosity. They understand that money isn't just for personal gain but can also be used to make a positive impact on the world. It's a valuable lesson in becoming money-conscious and socially responsible individuals.
Teaching kids about money can absolutely be fun and natural, and it is never too early to start. By incorporating these money-focused activities, you are setting your children up for financial success in the future. Love it or hate it, money will always be an important factor in life. So knowing what to do with it when you have money, and how to work hard to build wealth are valuable skills that will come back to your kids in spades!
