The Definitive Guide to Teaching Financial Education to Children

Would you believe that children can start developing lifelong financial habits at the tender age of 7? Just so you know, studies revealed that skills and shortcomings in money management are forged and shaped during childhood.

The thing about kids is that they tend to learn by example. It means that they look up to their parents and other older people around them and do what they’re doing.

As a parent, it’s only normal that you want your children to grow and become adults with good financial standing. But here’s the million-dollar question: how will you make them learn these critical skills that they will need and use for the rest of their lives?

To address this challenge, you have to think of ways to make financial education more child-friendly, presenting it in such a way that young minds can understand and remember easily.

Continue reading the definitive guide to teaching financial education to children and let them become masters in handling money the right way.

Let Them Decide on Their Spending

Although, understandably, you wouldn’t want your kids involved in making major financial decisions that will affect the whole family, one of the best things you can do to teach them more about money is to endow them with the power over some personal spending.

For example, if you have plans to make a major purchase soon, such as a vacation or a car, you can give your child a walkthrough of the entire process that involves comparisons and weighing the benefits and drawbacks of each option.

You can also help your child go through the same process if they want to use their own money to buy something, whether it is a new bike or smaller toys.

Meanwhile, you can involve teenagers in the decision-making by letting them participate in the research process. If you’re going on a vacation, let them check and compare airline and hotel prices. You can also designate them to look into different internet service providers if you wish to switch to a new one soon.

Educate Children on How to Stick to a Budget

Emphasize the importance of tracking expenses. Make sure your kid learns how to record their expenses every week and tabulate these at the end of the month. Doing so will help open their eyes to their spending.

Learning where their money goes is a critical aspect of becoming a better and effective saver even at a young age. Urge your child to think about their expenses and how fast they can achieve their savings goals if they adjust some of their habits.

It’s important that you know how to create an effective financial budget.

Explain the Source of Money

It’s extremely important that children know and understand the source of money as they learn about it. They should know that money comes from work before they learn other places and channels where it might come from.

Let them understand that money doesn’t simply flow out of dad’s or mom’s pockets. This is one of the most common misconceptions among kids, especially if there is something they wish to buy or they need a school allowance.

Take time explaining to them that you get paid for the work you do, and not doing any work means no payment for you. This is one of the most important lessons children should learn as far as finances are concerned.

Let Them Organize Their Money with Piggy Banks

Instead of the usual single piggy bank, you can give your children three piggy banks instead allotted for “save,” “give,” and “spend.” Every time your kid receives money in the form of an allowance, birthday gift, or a reward for household chores, encourage them to spread it over the three piggy banks.

Ask them how they plan to use their allowance whenever you give them some. Put the piggy banks beside the wish list of your child to remind them of their saving and spending goals.

Letting your kid choose how they want to divide the money and how they will use it is the secret to making it more educational. This kind of activity will not just make children more financially confident as it also allows parents to talk to their kids about money management.

Give Them Pocket Money

Another excellent way to give kids first-hand experience in handling and managing their finances is to give them pocket money or allowance. This will help them learn the perks they will enjoy if they spend and save wisely, as well as the consequences of reckless spending. Doing so will help lower the risks that they might face later on in life.

Kids also tend to value things that they buy using their own money. If you have no idea how much allowance you should give, don’t worry because there are no definite rules here. However, you might want to try to make sure that they earn it. It will help them learn more about how money truly works.

Your child’s allowance should depend on the household chores they do, like organizing their toys, cleaning, babysitting their younger siblings, or folding laundry. Regardless of how much allowance you settle for, take note that this will become a regular part of your household budget. See to it that it will be a win-win situation for both you and your kid.

Teach Kids the Difference of Needs and Wants

Everything is a need in the eyes of a child. They need the latest Xbox. They need the hottest pair of shoes. They need chocolates from the supermarket. This is why it’s important to teach their innocent minds the true difference between a need and a want. For instance, they always need food, but it doesn’t mean they need burgers and fries.

If your kid will spend a monetary gift or something they earned, ask them what they want and if they have enough money already or if they should still save more. Children must learn to understand that most of the time, they need to save for things they want.

Prepare a Wish List with Your Children

One of the most essential elements of financial education is to make a list of goals or priorities. Make them understand that they can’t get all the things they want in one go. However, as long as they plan, they can achieve their objectives after some time.

This is an amazing lesson that children should learn at an early age. Sit down with them and ask them to prepare a wish list of five things. Tell them to rank these items in order of importance, starting from the most important down to the least important one.

Once the list is ready, discuss with your kid the different ways they can get the items on their wish list.

Open a Bank Account for Your Child

Guide your child in setting up a checking or savings account to teach them about savings goals and proper budgeting. Letting your child have his or her bank account will also make them learn more about banking fees, interest rates, and how to track their savings and spending. Although checks are rarely used these days, your child should also learn how to write one.

Role-Play with Play Money

Try including play money in the dramatic play area of your child and urge them to play a role-playing game where money is exchanged. There are several fun and exciting ways to make money a part of your child’s games.

For instance, you can pretend to be a diner at a restaurant or a shopper at the supermarket. Early concepts about money come from kids interacting with money, counting, and numbers. Playing board games based on money themes can also help them learn more about exchanging property and goods for money.

Shop and Teach at the Same Time

Go shopping with your children and tell them how you make decisions on the items you buy. Let your children know about your expenses and your priorities the moment you set foot in the store.

Show them why you pick one item over the other. Explain how coupons, discounts, and sales promotions work. Once again, remember that your children will look up to you and emulate your behavior.

While you’re busy shopping, you can also give your kids a small amount of cash that they can spend on their own. This will help them realize the importance of spending within the budget given to them.

The Bottom Line

You see, teaching financial education to children isn’t as hard as it may seem. All it takes is a bit of imagination, forethought, and patience.

Even the simple act of taking time to talk about money with your kids is already enough to urge them to start asking questions and honing lifelong skills.

There are many apps that can assist you in teaching your son how to deal with his money, lie de NatWest Rooster Money.