Student loans and mortgages are just two issues that will be on your children’s minds when they become adults, yet the process of becoming financially savvy should begin in childhood. Tests given by the National Financial Educators Council found that test takers aged 15 to 18 scored only 59.6% in financial literacy. Parents should therefore step in, making financial literacy an important part of their children’s education. As with all other subjects, the key to keeping kids engaged, is fun! In this post we provide a few ideas that may help you achieve this goal.
Toddlers and small children may not be able to add and subtract yet, but they can definitely be introduced to the concept of money through simple play. What child doesn’t love a noisy cash register that rings and opens up to reveal different sized coins? Set up a grocery store or other ‘shop’ at home and show your child that every time they want an item, they have to give one or more of the coins in their cash register to do so.
Once children are able to add and subtract, it’s time to teach them about change. Start out at home, teaching them how to ‘count up’ to the next dollar when purchasing items that require change in cents. If they have money saved from presents and/or an allowance for carrying out simple chores, go online and show them how much fun it is to find a good bargain. Check out a toy they wish to buy on various sites, and make it a point to purchase from the company offering the lowest total (include sending costs in your calculations).
Children who know how to calculate percentages are ready to learn about borrowing, lending, and interest. This may sound challenging, but it is actually one of the most important aspects of financial literacy, since in adulthood your kids will most likely be taking out a mortgage and other significant loans. American graduates are more burdened by student debt than ever before, owing a total of over $1.48 trillion. When your children are close to university age you can go into concrete topics such as the difference between government and private student funding, but when they are younger, simply knowing that interest can significantly increase the final amount paid, is key. How to do this while having fun, however? If your child is wanting to make a special purchase and asks for an advance on their allowance, for instance, apply interest to this amount, showing how much more they would have to pay if you were a bank and you charged them a standard percentage rate. You don’t have to charge them, of course, but calculating together can enlighten them on why it is sometimes best to save for a desired item, provided the waiting period is reasonable.
There are many apps specifically catered to children, including Bankaroo (which allows kids to enter allowances received, set savings goals and see how much they have spent), Kids Money (which shows kids how long it will take them to save for a special purpose if they set aside part or all of their allowance) and BusyKids, which will teach them how to share, save, and invest money. Future Wall Street tycoons will love Stockpile. This app allows them to buy fractional shares in their favorite companies.
When kids are teens, a summer job will teach them about the value of money, but will also hone their time management skills and independence. Many teens who start making money wish to continue doing so while they are studying. Doing so could help them rely less on student debt and save up for postgraduate studies.
We have mentioned just a few ways to teach children to be better, more responsible financial citizens. From an early age, children need to be comfortable around the idea of finances. Honing their math skills, playing games, and relying on engaging technology will help children grow to be financially literate adults who know the importance of saving for a rainy day.
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