There are many reasons you need to teach your child about financial literacy for kids. Anyone can go through financial troubles at any time. They can be the result of accidents, job loss, illness, or as we recently realized, a global pandemic. If the possibility of losing your source of income makes you anxious, you’re not alone. About 31% of Australians revealed going through financial stress this year, according to the Melbourne Institute.
If you have kids, the anxiety is likely worse. Households with more children are more vulnerable to financial shocks, according to the World Bank Group. Financial literacy for kids is a vital life skill. It is a skill that you must teach your child even before they experience financial turmoil.
The economic uncertainty that the pandemic brought caused parents to adjust their finances and teach their children the value of money. This article aims to help you teach financial literacy for kids.
How to Teach Your Child Financial Literacy for Kids
The best way to teach your child financial literacy is to give them firsthand experience in earning, spending, and saving money. Here is how you can get started:
Show Them How It’s Done
Children learn by example. Your money habits will have a huge influence on your child. Various daily activities can allow you to show your child how to make sound financial decisions. For example, when you go to the grocery store, teach them the value of budgeting and planning. You could follow our money-saving tips for single parents and show your child smart spending habits.
Let Them Budget Their Own Money
Opening a savings account for your child is a practical way to teach them financial literacy for kids. Put their weekly or monthly allowance on the account and enrol it to mobile or online banking. This will allow you to monitor the activities in the account.
Encourage them to be responsible with the money so their allowance will last for the whole week or month. You could also teach them about the concept of compound interest if they are old enough to understand the math.
Explain to them the Benefits of Living Below Your Means
It can be a challenge to teach your child the importance of living below your means. Most children have not yet fully developed their emotional regulation skills. They still tend to base their decisions on their emotions. One way to teach them about the concept is to be firm with the allowance you give them. For example, if they overspend their money don’t give them more. It will teach them to think hard before buying something.
Teach Them About Short-Term and Long-Term Goals
Is your child bugging you about getting them the new iPhone? If your child wants to buy something expensive, tell them that is a long-term goal and that they can’t get it right away. You can encourage them to be frugal about their money and budget their allowance carefully so that they can set aside some amount to purchase the phone in the future.
Financial literacy for kids is a useful life skill. Unfortunately, it is not taught in high school. The good thing is that there are many ways you can teach it to your child. Remember that what you teach them about money today will be how they behave with money when they become an adult.