Financial literacy is an integral part of daily life, and it’s never too early to sow the seeds of fiscal responsibility. A future of informed spending, saving, and investing really begins with conversations at school and around the dinner table. 

In this step-by-step guide, we’ll explore some practical tips for teaching kids financial literacy and ensuring they understand the value of a dollar. 

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1. Explain the Basics of Money

For young kids especially, it’s important to start with the basics of financial literacy. Money habits are formed by age seven, meaning that early childhood is the perfect time to discuss concepts like counting, saving, and delaying gratification. 

Children should understand from a young age that money is a finite resource—it doesn’t grow on trees. Explain how people earn money and where it goes when spent. While this isn’t necessarily the time for Economics 101, laying a solid foundation can promote greater responsibility down the line.

2. Help Them Start Working and Earning

Once they’ve grasped the basic concept of money and how it works, kids are ready to start handling their own finances. You can start by implementing a weekly allowance system for chores. This is a great way to simulate financial literacy through working and earning. 

Help younger children manage their money in a piggy bank. For older kids and teens, consider opening a youth savings account. Popular options include:

  • Alliant Credit Union Kids Savings Account
  • Capital One Kids Savings Account
  • USAlliance Financial MyLife Savings for Kids
  • Northpointe Bank Kids Savings Account

Having something tangible to show for their efforts can motivate kids to hone their work ethic and seek new ways to earn, potentially offering parents some relief around the house.

3. Encourage Financial Literacy Through Smart Spending and Saving

When kids start earning their own money, they may be tempted to spend it right away. However, this is a good opportunity to delve deeper into the concept of saving. Advise them to portion funds for different things, such as:

  • Immediate spending on small treats or toys
  • Short-term savings for more expensive items
  • Long-term savings for their future needs, like college and cars
  • Charitable giving

Remember that children learn best through observation and imitation. Demonstrate financial literacy by involving them in everyday shopping decisions. For example, you could take them grocery shopping and explain how to compare prices, hunt for deals, and evaluate the true necessity of a purchase.

Be sure to discuss the difference between wants and needs. University of Wisconsin-Extension defines needs as, “the essentials or the basics of life one must have in order to survive,” and wants as, “items that are nice to have, but are not essentials to living.” 

Get kids in the habit of asking themselves, “Do I need this, or do I just want it?” before parting with their hard-earned cash. While discretionary spending is perfectly fine in moderation, it’s important for kids to understand the importance of saving for a rainy day.

4. Discuss the Power of Investing in Financial Literacy

It may be over the heads of younger kids, but older children and teens should have a basic understanding of investing. Use simple analogies to explain the concept, like planting a seed and watching it grow over time. Explain that, although you can’t always see your money growing in real-time, it’s always working behind the scenes to build wealth. 

Utilize resources like Investopedia to teach about the risks and rewards of investing. Encourage kids to ask questions, do their own research, and invest in causes that are important to them. That way, investing will feel less like a chore and more like an exciting opportunity—which it is.

5. Promote Entrepreneurship

Fostering entrepreneurial skills from a young age is key to raising confident, money-savvy kids. Maybe you’ll encourage kids to start a small business like a lemonade stand, or manage a craft or bake sale. This teaches them about profit-making and customer service.

It also encourages curiosity and creativity, two pillars of financial literacy and wealth management. There’s nothing better than earning money through your passions and hobbies, and the earlier kids learn how to leverage their interests to their advantage, the better off they will be financially. 

Most importantly, entrepreneurship fosters a growth mindset in young people. It teaches them the importance of perseverance. These lessons will carry on into adulthood, setting them up for success in all aspects of life.

6. Use Games and Apps for Financial Education

Gamifying financial education is a great way to get kids excited about learning. Younger kids might enjoy apps like Rooster Money, which features a chore schedule, savings tracker, and a virtual piggy bank. The World of Money app is another great choice. It includes video lectures and other tools for various age groups, from kids to young adults.

If you’re feeling up to it, consider creating games of your own. Get kids involved and encourage them to use their imagination to come up with fun ways to earn and spend.

7. Stress the Importance of Continuous Learning in Financial Literacy

Not even adults have all the answers, and it’s important to let kids know they can—and most likely will—make financial mistakes. Whether it be making a large, foolish purchase on impulse or choosing the wrong investment, a money misstep can certainly cause stress, but it needn’t derail their goals. Encourage kids to keep learning about financial literacy and keep asking questions. 

It’s Never Too Early to Talk About Money

Don’t be afraid to include kids in financial conversations from an early age. The sooner they’re comfortable with money management, the sooner they’ll be on track to wealth. Teach them to embrace ongoing learning and never be afraid to take a leap of faith when it makes sense to do so.

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