Financial Literacy 101 for Children

One of the most important things we need to know is how to manage our financial assets, including savings, spending and investment. Unfortunately, this is something that many of us are never taught. We may get an allowance as kids, but often it’s just given to us with no explanation of why we’re getting it or what we’re supposed to do with it. As a result, many of us do not know how to handle our finances. We may end up in debt or make poor financial decisions that can have long-term consequences. Financial literacy is the ability to understand and use various financial skills, including personal finance, budgeting, and investing. It’s essential to start teaching kids about money early on to develop good financial habits that will last a lifetime.

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Table of Contents

Why is Financial Literacy Important?

You’re probably thinking, you have a young child, they don’t go anywhere on their own, so they don’t need any financial skills, right? If that’s your line of thinking, sorry, but we can’t agree. If you want your child to have a successful life down the line, they need to start learning ASAP.

For one, it can help kids avoid going into debt, and it can also teach them to save money for their future goals, such as buying a house or retirement. Additionally, financially literate kids are more likely to be responsible spenders and savers.

Teaching Kids About Finances

Before talking about the topic more seriously, we should answer a simple question: where do kids learn about money and finances?

Well, according to a nationwide survey conducted by the Jump$tart Coalition for Personal Financial Literacy, here’s where:

58.3% say financial skills learned at home
19.5% say financial skills learned at school
17.6% say financial skills learned from experience

So, where do kids learn about financial problems, savings, and responsibilities? A little bit in school. However, most kids learn financial skills – both good and bad – at home from their parents.

What was the point of us asking this question in the first place? You need to know where your kids are getting their information about money from before you can start talking to them about it.

You need to take a proactive approach in teaching them about money to learn how to handle their finances responsibly.

Lack of Practical Knowledge

One of the reasons many adults don’t know how to handle their finances is that they lack practical knowledge. This can easily be fixed by teaching kids about money in a hands-on way.

A survey of 15-year-old children in the United States from a few years ago discovered that 1 in 5 students didn’t learn financial skills that can be applied in everyday situations. Some of these skills include:

Building a simple budget: Even making a grocery list requires some basic budgeting skills.
Paying bills is an important skill to have, especially if you want to avoid late fees and other penalties.
Understanding credit/debit cards: With the popularity of electronic payments, kids need to understand how credit and debit cards work.

Your children should know many other practical money management skills, but these are just a few examples. The point is that many kids lack the practical knowledge they need to handle their finances responsibly.

That is something that can be fixed by teaching them about money in a hands-on way.

Financial Literacy Lessons During Pandemic

The current pandemic has been a hard time for many families. Some have lost their jobs, while others are struggling to make ends meet. This can be a difficult time to talk about money with kids.

However, it can also be an essential opportunity to teach them about money. You can use this time to talk about budgeting, saving, and responsible spending.

This can be a difficult conversation, but it’s important to remember that your kids are watching you and learning from you. So even if you’re struggling financially, try to remain positive and keep the lines of communication open with your children.

How to Start Teaching Kids Financial Literacy

Now that we’ve talked about the importance of teaching kids about money. Let’s talk about how actually to do it. Here are a few tips:

● Pre-school and Kindergarten Kids

The best way to teach pre-school and kindergarten kids about money is to start with the basics, and you can teach them about counting, sorting, and recognizing coins and bills.

You can also use simple games and activities to help them understand basic concepts like saving, spending, and giving.

Allowances

We have discussed the importance of having allowance for kids in the article of How Much Should Be a Kids Pocket Money per Week.

If you decide to give your child an allowance, be sure to talk to them about how they should spend it. Help them set aside money for things like savings and charity.

Last but not least, money is not everything. It is good to know how to save and achieve your goals. Also spending time with family, friends and yourself is the ultimate happiness source.

● Elementary and Middle School Kids

As your child gets older, you can teach them more advanced concepts like compound interest and investment. You can also introduce them to things like credit cards and loans.

It’s essential to make sure that they understand the difference between good debt and bad debt. You don’t want them to get into a situation where they’re overwhelmed by debt.

The truth about advertising

One of the most important things you can do is teach your children about advertising. Help them understand that not everything they see in an ad is true.

Teach them to be critical thinkers who question what they see and hear. That will help them make better decisions about their finances as they get older.

● High School Students

As your child enters high school, you can start to talk about more serious topics like credit scores and financial aid.

You can also help them start to plan for their future by teaching them about things like budgeting, saving, and investing. These are important skills that they’ll need when they enter adulthood.

‘Money Talks’ with teenagers

One of the best ways to teach your teenager about money is to have regular ‘money talks’ with them. This is when you can sit down and talk about your finances openly and honestly.

Be sure to ask them questions about their finances and let them know that you’re there to help if they need it. That way, they’ll feel comfortable coming to you with any questions or concerns.

● University and College Students/Early Adulthood

As your child enters university or college, you can start to talk about more advanced topics like credit scores, financial aid and investment tools.

Closing Thoughts

No matter your child’s age, it’s never too early (or too late) to start talking to them about money. The important thing is to be patient and have ongoing conversations about money as they grow up. With patience and time, you can help your children develop the financial skills they need to succeed.

About Me

Hi, there. I am Lin. Together with my husband and two kids, we live in the beautiful Netherlands in Europe. I am dedicated to self-development, creating quality time for the whole family, and fully supporting kids with their potentials with all I have learned from engineering, MBA, and 10+ years of working experience in the energy sector.