If there’s one thing we realize most about adulthood and as we get older, it’s that understanding money and its value are a necessary asset to navigating through life.
Unfortunately, financial literacy is not taught in schools, which means our children are lacking sufficient knowledge behind the very thing they will be working towards.
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While CardHub reports consumer debt continues to rise in our nation to ugly numbers, it’s more important than ever to teach our kids basic money lessons to help them understand the ABCs of saving and spending before they’re old enough to invest.
Turn hobbies into business
Remember when we crafted fancy lemonade stands as kids? Well, thanks to social media, it’s very possible to move beyond sidewalks and start turning hobbies into a real business with a little help and healthy encouragement. Whether your kid loves baking or go-kart racing, find a creative way to utilize their skills and hobbies to help them earn money. Not only is this a fun way to spend time with them, but it’s also an excellent method for young minds to identify how it’s a valuable reward for working hard.
Teach budget skills
No matter how old you are, budgeting is an imperative part of financial responsibility and security. When planning your own finances, show them your budgeting skills and teach them how you deal with finances. Additionally, provide them with an allowance strictly for developing a habit where they learn how to budget using what’s given. As a great way to help them manage money, show them the “three-jar method” for sharing, saving and spending. Once they see progress and reap its benefits, they’ll feel proud and be wiser.
Saving for larger purchases
Credit cards help a great deal for making large purchases when we want them. But it’s a bad habit that can lead to a financial sinkhole if not careful. Patience is a virtue and a valid method in helping kids stay out of bad money habits, so teach them about waiting, and how best to save for large purchases. Not only will they have time to decide if it’s something they truly want versus what they need, but they’ll feel immediate consequences of overspending if they don’t have enough for another purchase.
Power of sharing
Showing children how to give back shouldn’t be exclusive to holidays. While it’s up to us to set an example, teach them the power of their “sharing jar” and pique their philanthropic interest by researching causes and organizations with them. Harvard Business School reports donating increases self-esteem and confidence in children as they see firsthand how their earnings help others in a local or global setting. Not only does it empower them to make a positive difference, but it also shows how money is worth more when shared.
Taxes and fees
Without diving into U.S. Tax Codes (and boring them), teach your kids the basic concepts of taxes. Before the age of 10, they understand the word in theory but are unsure of how it applies to them and their future. Explain the different kinds of taxes you’re currently paying and clarify why taxes are necessary. Additionally, explore what fees mean and how certain businesses will incur such costs for services and goods. If you hope to enlighten them further on the subject, charge late fees for not completing their chores on time.
Money doesn’t grow on trees
If you take your kids with you to the ATM, you might see their eyes brighten with curiosity as they notice a machine effortlessly “handing out” money. Because kids are so impressionable before the age of 10, it’s essential to create a dialogue imparting that money doesn’t appear out of thin air — and mommy and daddy are not millionaires like everyone on TV. Talk to them about how you work to make money and that the bank is a great place to keep it safe. While you’re at it, avoid using credit cards around them as they begin to see plastic as a norm and will consider similar methods when older. Dartmouth College researchers suggest if children see parents struggling with debt and finances at a young age, chances are history will repeat.
