The NFCC’s 2011 Financial Literacy Survey found that 42% of adults garnered most of their personal finance knowledge from their parents. Only about 1 in 10 adults learned about this subject at school or from a financial professional.
It is now more important than ever to make sure your children understand the basic concepts of financial awareness. The following steps can help arm children with smart financial skills that can place them on the path to financial literacy rather than debt overload.
- Learn good money management skills yourself. One of the best ways to teach children about money is to lead by example. Parents set the foundation for their children’s learning, and kids are more likely to become good money managers when parents show financial responsibility.
- Give kids an allowance. There are differing opinions on whether or not to give children an allowance. While some may consider it spoiling kids, giving children a regular income can be a great opportunity to teach them the basics of earning, spending, and saving. Parents can also use an allowance to help children learn the difference between wants and needs.
- Have your young children cut coupons with you. It will make them feel like they’re helping out and when you go grocery shopping you can show them how much they helped you save.
- Over the weekend you can teach your children about the responsibilities of earning money by giving them some simple household chores. While doing so show them the value of money. If you just hand a child $5 a week and have them do chores they may not fully understand the value of money. Instead, for every dish they wash they earn a nickel. That way they will understand that a nickel has a certain value.
- Teach them how to save. Set them up with a Junior Bank account or a CD that they cannot touch for a few years. Let them watch their money grow.
- Instead of receiving toys for holidays and birthdays have close relatives give savings bonds or money to your children. Set these aside in different accounts, such as “the car fund” or “the college fund” for when your children are older.
- Teach your older children how to comparison shop. As early as the third grade children start to pick up on costs and how they relate to purchases. If nothing else it will keep their minds preoccupied while you’re pushing a shopping cart around.
- Talk to your children about simple ways to save money around the house. Saving on heating and electricity is very important. Teach your children to turn the light off after leaving a room, or not to leave the water running while brushing their teeth.
- When your children are between 11 and 15 allow them to work simple jobs to teach them about responsibilities such as a paper route or babysitting. It will give them a sense of maturity and accomplishment when they have earned the money.