With the cost of living on the rise, parents have become more aware of the
need to raise financially savvy kids. Good money skills, however, don’t
come naturally. To teach your children financial literacy, consider these
10 tips:
- Lay a foundation.
Begin teaching your child financial literacy early on through everyday
conversations and choices at the grocery store: “If we buy this cereal, we
can’t buy those cookies.” This puts it at his level and plants seeds for
financial responsibility.
- Make allowances.
An allowance can teach your child how to earn, save and become a wise
consumer. First explore your philosophy regarding an allowance: “What will
be required of my child? What will the money be used for? And how much will
I give?” Then decide how often you will pay.
- Brand a business.
Encourage your child to get involved in a business venture. This can be as
simple as shoveling driveways for neighbors or as elaborate as starting a
pet-care business. If you own a business, find ways to get your child
involved in that, too.
- Establish expectations.
Once your child begins to acquire funds, create guidelines for how the
money is to be allocated, such as the one-third principle: One-third goes
to savings, one-third for charity and one-third for spending. As your child
matures, consider adding a fourth category for investing.
- Set up savings.
Open a bank savings account for your child and provide tangible experiences
so he learns about the banking process. Rather than using online banking or
drive-through services, have him accompany you to the building, fill out
the deposit slip and hand it to the teller. Teach him how to make
adjustments to his bank register and read statements for interest earned on
his account.
- Investment opportunities.
As your child shows an interest, encourage him to buy stocks in companies
that produce products or services he uses or is familiar with. Have him
track their progress too.
- Set sizable spending goals.
Help your child create spending goals for larger purchases by writing down
what he wants to buy and putting a picture of the item in a visible
location. Then help him devise a plan: “How much do I need to save to
purchase this item? How long will it take to save for it?”
- Communicate competent consumer skills.
Teach your child to make informed choices by exploring all the options:
“Can I find this item on sale?” “Does it need to be new?” “What other
things could I buy with this money?” Also talk about the reality of
marketing: “Will this item make me as happy as the children seem on TV?”
Discuss delayed gratification, too. If an item costs more than five
dollars, encourage him to think about it several days before making the
purchase. But let him make the final decision, as even foolish spending
will teach him to be a wise consumer.
- Provide a parallel on plastic.
A good way to introduce the concept of credit and debit cards is through
prepaid bankcards or gift cards as they provide a finite amount of money,
but give children liberty to make spending choices over time. Have your
child keep track of these balances and put a label on the back of the card.
- Foster philanthropic giving.
Encourage your child to give a portion of his earnings to help those less
fortunate, as this teaches compassion and civic responsibility. Don’t
dictate where or how much he must give. Let him choose the organization.
Remind him that philanthropy encompasses giving of our time, too.
Finally, be a good role model. Talk with your child openly about money and
let him help with family finances by shopping for sales, clipping coupons,
comparing prices and checking receipts to make sure you received advertised
discounts. Let him see you modeling these and other financially responsible
behaviors, too.
Books for Your Money!
- “A Chair for My Mother” by Vera Williams
- “Beatrice’s Goat” by Page McBrier
- “Dollars and Cents for Kids” by Janet Bossner
- “The Everything Kids’ Money Book” by Diane Mayr
- “Less than Zero” by Stuart Murphy
- “The Pickle Patch Bathtub” by Frances Kennedy
- “Rock, Brock, and the Saving Shock” by Sheila Bair
- “Something Special for Me” by Vera Williams
Gravy Train Websites!
- consumerjungle.org
- economist.com/markets/bigmac/Index.cfm
- fdic.gov/about/learn/learning/index.html
- jumpstartcoalition.org
- stockmarketgame.org
- usmint.gov/kids/flashIndex.cfm
