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Most people have faced that heart-sinking moment at the checkout counter or that silent prayer before checking their bank balance after a month of unforeseen expenses. Now, imagine if they’d been better equipped from a young age to navigate these financial twists and turns.
Recent stats point to a poor savings culture amongst people living in the UK and as a parent, you need to start early to teach your kids financial literacy.
Understanding financial literacy for kids
Financial literacy, at its heart, isn’t just about understanding money—it’s about making empowered choices. When we talk about financial literacy for children, it encompasses several foundational elements such as:
- Budgeting and saving: Teaching kids how to allocate their money, prioritise needs over wants, and set aside a portion for future use.
- Earning and spending: Introducing the idea of earning (whether through chores or small jobs) and making thoughtful decisions about where to spend and why.
- Investing: While this might sound advanced, even young kids can grasp the basic concept of letting money grow over time.
- Borrowing and debt: In a world increasingly driven by credit, even a rudimentary understanding of the idea of owing money can be invaluable.
So, why start so young? Just as learning a language or picking up an instrument is often easier in our formative years, the financial habits we nurture early can become second nature. Introducing these financial literacy concepts in bite-sized, age-appropriate doses helps children:
- Develop a healthy money mindset: They’ll likely approach financial decisions with confidence and caution, rather than fear or impulsiveness.
- Forge strong saving habits: When saving or investing becomes as routine as brushing one’s teeth, it sets the stage for lifelong financial health.
- Navigate the future with foresight: Today’s child will one day be tomorrow’s adult facing bigger financial decisions – be it university, housing, or starting a family. Early financial education can be the compass guiding them through these milestones.
In essence, financial literacy for kids isn’t just about money. It’s about laying the groundwork for informed decision-making, fostering independence, and nurturing a sense of responsibility that will benefit them for a lifetime.
Age-appropriate financial lessons
Kids vary in understanding and their ability to grasp financial concepts also varies by their current stage in life. So how do you go about navigating this? We’ve put together different age-appropriate financial lessons you can start teaching your kids now.
Toddlers and preschoolers: The building blocks of money
- Introducing coins and notes: At this age, tactile learning is crucial. Let them touch, hold, and play with coins and notes, learning the difference between a penny, a pound, and everything in between. It’s not just about understanding the value but getting acquainted with money’s physicality.
- Simple Saving with the piggy bank: Piggy banks are more than just a cute accessory for their room. It can be a tool to teach financial literacy for kids. Every time they get some coins, encourage them to ‘feed’ the piggy. Over time, they’ll marvel at how their little contributions add up, introducing them to the basic idea of accumulation and saving.
Elementary Age (5-11 years): The foundations of financial responsibility
- Basic budgeting: When they get their pocket money, sit down with them. Discuss how they want to spend it, maybe even creating small envelopes for different purposes – ‘toys’, ‘books’, ‘sweets’. It instils the concept of allocation.
- Understanding wants vs. needs: A simple trip to the store can be an educational experience. When they ask for toys or sweets, engage in a conversation differentiating between ‘wanting’ something and ‘needing’ it. Over time, they’ll start making more thoughtful purchase decisions.
Teens (12-18 years): Navigating the modern money maze
- Introduction to banking: Now’s the time to graduate from the piggy bank. Open their first savings account, teaching them about interest, deposits, withdrawals, and credit scores. If they’re earning, introduce them to checking accounts and the responsibility that comes with it.
- Digital money in a digital age: With the proliferation of online shopping and apps, it’s essential they understand the virtual aspect of money. Walk them through safe online transactions, reading bank statements, and being cautious of oversharing financial information.
- Preparing for bigger expenses: Whether it’s their first car or planning for university, these significant financial milestones are on the horizon. Discuss the costs involved, and the need for planning, and possibly introduce the idea of loans and credit.
Equipped with these lessons, children and teens are better positioned to face the financial challenges of adulthood, making informed and responsible decisions every step of the way
Interactive financial learning tools
In our digital age, financial education doesn’t need to be limited to piggy banks and pocket money. With various resources available, you can employ various engaging methods to instil money-management skills in your children.
Here’s a breakdown of some tools to make learning about financial literacy for kids both fun and effective:
- Monopoly: Monopoly not only offers hours of family fun but introduces concepts like property investments, taxation, and strategic spending.
- Payday: In this game, players navigate a month’s worth of bills, loans, and unexpected expenses, teaching budgeting and planning.
- The Game of life: It offers a broader perspective on life’s financial journey, from university and jobs to insurance and loans.
Apps and online platforms on financial literacy for kids
Here are examples of some apps and online platforms that make financial literacy for kids easier:
- GoHenry: Designed for older children and teens, this app provides real-time budgeting tools and even offers a pre-paid card option, helping them understand the dynamics of modern banking.
- World of Money: This app is a comprehensive financial education tool with video lectures for different age groups, from children ages 7 to 9 to young adults ages 19 to 26.
- RoosterMoney: RoosterMoney has a chore schedule, a savings tracker, an allowance manager with option of automatic payments, and a virtual piggy bank. What makes it unique is its Spend, Save, and Donate posts.
Books on financial literacy for kids
Some examples of books that can be used in teaching financial literacy for kids are:
- Toddlers and preschoolers: “Bunny Money” by Rosemary Wells paints a colourful story about bunnies making spending decisions, a fun introduction for toddlers and preschoolers.
- Elementary Kids: “The Lemonade War” by Jacqueline Davies dives into the world of entrepreneurship through two siblings’ lemonade stand competition.
- Teenagers: “Rich Dad Poor Dad for Teens” by Robert T. Kiyosaki breaks down complex financial concepts into relatable lessons for young adults, offering them insights on making money work for them.
Incorporating these tools into your child’s routine can seamlessly weave financial lessons into their daily life, making the subject less intimidating and more engaging. Remember, the goal is to make financial literacy accessible, relatable, and, most importantly, enjoyable.
Practical money lessons through experience
Sometimes, the most impactful lessons don’t come from textbooks or apps but from real-life experiences. These hands-on encounters can mould a child’s financial perspective, making abstract concepts tangible.
Here’s how you can guide your children through real-world financial situations:
Setting up allowances
- Structured allowance: A fixed allowance can be given regularly, say weekly or monthly. This consistent financial inflow can teach kids budgeting, as they’ll need to manage their money until the next ‘payday’. It mimics the consistency of a salary and introduces them to the world of personal finance.
- Chore-based allowance: Tying allowance to chores adds an element of earning. It’s not just about managing money but understanding its value. This approach can instil a strong work ethic, teaching children that money is earned, not just given.
Encouraging entrepreneurship
- Lemonade stands: Beyond the fun of this, it also teaches basics like investment (buying ingredients), pricing, and profit.
- Yard sales: Clearing out old toys and clothes isn’t just therapeutic; it’s a lesson in valuation. What price should they put on a once-favoured toy? It’s economics in the front yard.
- Online ventures: For tech-savvy teens, platforms like Etsy or even tutoring services can be a great start. It introduces them to digital commerce, customer service, and online marketing.
Teaching by example
- Shopping trips: A grocery store can be a financial classroom. Discuss choices, compare prices, and let them handle transactions. They’ll understand budgeting, quality vs. quantity, and the value of money.
- Sales and discounts: Introduce them to the world of discounts, but also the psychology behind it. Just because it’s on sale doesn’t mean it’s a good buy. It teaches discernment in spending.
- Regular bills and expenses: Using Know Your Dosh, you can show your older kids all your family bills and expenses. Let them see the cost of electricity, internet, or other utilities. It provides a sense of the financial responsibilities that come with running a household.
The beauty of these lessons lies in their simplicity. They’re embedded in everyday activities, ensuring that kids grow up with a practical understanding of money, not just a theoretical one. The world becomes their financial playground, with each experience shaping their fiscal future.
Empower your kids for tomorrow
In a world where financial complexities are ever-increasing, laying the groundwork for financial literacy from a young age is not just a skill – it’s a gift. Raising financially savvy kids isn’t about producing child accountants but fostering independent thinkers who can navigate life’s monetary challenges. The benefits are many, extending beyond mere money management. We’re talking about instilling confidence, encouraging responsibility, and nurturing a holistic worldview where money is seen not as an end but as a means to achieve dreams, support loved ones, and make a difference.
When your kids are in their teens or a little older, add them to Know Your Dosh and help them understand your family finances, let them ask questions about it, and how you manage it so that they are already aware of it in case of an emergency or unfortunate circumstances.
When your kids are financially responsible, you can be confident to share your financial information with them ensuring that your resources are well taken care of even long after you are gone.
Know Your Dosh allows you to securely share your financial information with your kids including your assets and liabilities so that in cases of emergencies or when you are not there, your finances can be properly managed to take care of loved ones.
Sign up to Know Your Dosh now to get started!
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