Learning about money is something that many of us probably remember from our childhood. The first time we helped count couch change or the first time we earned a dollar for a job well-done are typically big milestones. Though we may not have realized it at the time, these small steps were often the first ones on a much bigger journey related to personal finance.
Today, teaching children about personal finance is more important than ever before. Online purchases and apps can make money seem like an intangible thing rather than the backbone of our economy. Understanding the value of money and the importance of responsible personal finance can be the difference between a lifetime of comfort and a struggle to make ends meet.
Fortunately, there are a variety of ways that parents can begin having conversations about finances early in their children’s development. Creating a strong foundation of finance is as important as kids learning their ABCs, and it can be just as easy to teach.
Although it may come as somewhat of a surprise, the teaching of financial literacy isn’t something that many students will learn in school. In fact, only 16% of high school students are required to take any sort of personal finance course that would teach them about balancing a checkbook, interest rates, and personal finance management. In one survey, nearly 84% of recent high school graduates indicated that they wished it was something they had learned about before entering “the real world.”
Nearly any conversation you could have with someone who’s “made it” about their personal success will contain some component of personal finance management. Financial knowledge is almost an essential aspect of building wealth and improving one’s financial outlook. Understanding the difference between ‘needs’ and ‘wants’ is often the first step in this process.
Sadly, the effects of not understanding these differences can be drastic. Debt can be absolutely crushing; poor decisions early in life can limit your ability to pull yourself out of debt or to accumulate wealth later on. Excessive debt can lead to significant mental health issues associated with chronic stress, anxiety, and behavioral changes.
Ways to Teach Your Kids About Finance
Helping kids learn about responsible finance management can start at a very early age. For instance, even children as young as 2 or 3 can begin to learn the names of coins. If your kids enjoy small games like ‘shopping’ or ‘store,’ you can teach them to exchange money to acquire the items around the house they want to ‘buy.’
By the time young children reach preschool age, they are learning all sorts of new things every day. Here, finance can be built into other activities that they are already doing. For example, they can build motor skills such as using scissors to cut out coupons or they can build social skills by learning to speak with cashiers and hand them the money at the grocery store.
At home, young children can also begin to earn their own money by completing age-appropriate chores around the house. Young toddlers can help with picking up toys or matching socks in the laundry. As the chores become more complicated, kids can earn more money for the work they complete, which teaches them the value of being paid to accomplish a task. Taking kids to the bank to open a savings account can also be a strong step in helping them develop good financial habits.
Personal finance management is an important aspect of becoming a successful adult. There are many ways that parents can begin helping their children learn about finance from a young age. All of these small learning opportunities will add up and ultimately help your children get ahead in life.