Teaching Kids About Money: 3 Lessons For Financial Literacy
Teaching kids about money management is a good start to building a strong foundation of financial competence, as the current education system doesn’t focus on financial literacy. So talking about money from the early growing stages of kids can save them from future pitfalls. Moreover, it will help them to develop good financial habits that will last a lifetime.
Lesson 1: The Power of Allowance
To introduce your kids to money, start by giving them a small allowance and let them juggle with it. This allowance can be as little as Rs 100 every month. This will give them a chance to practice budgeting and saving money. Also, ensure that they earn the allowance by helping and doing household chores.
Furthermore, teach them about the different thumb rules like 50:30:20 but with a twist!
|50%||Spending||Buying items of immediate need like toys, stationary, accessories, favorite food like chocolate, ice cream, and others|
|40%||Saving||Saving for desires like a new toy, playset, bicycle, watch, or others|
|10%||Sharing||Giving back to society like donating to charity, helping poor people, or volunteering|
Suppose your kids want a set of new crayons but also desire a bicycle. The allowance will help them to identify their immediate needs and save for their desires simultaneously. Ultimately, it will also help inculcate the virtue of patience in their financial education.
To boost up the process, you can even provide a 10% reward or bonus and it would act as an insight into the corporate realm. Besides, tell them about your own experience when you saved up for months to buy your first car. Kids watch their parents carefully, so they learn a lot from how their parents act.
Lesson 2: The Importance of Giving
It is vital to teach the kids about the importance of giving. Encouraging them to donate some of their allowance to charity. This will foster a sense of generosity and help them to learn about the importance of helping others.
For instance, you could recommend paying a visit to an older neighbor who can't go out as often, picking a charity to help, or sharing some of their rarely worn clothes with a shelter that cares for women and kids. These experiences teach kids the joy of giving back.
Lesson 3: The Dangers of Debt
Since the modern world thrives on EMI and loans, you should teach your kids about the dangers of debt. You should tell them about the concept of debt and the challenging journey of repaying it. Tell them about real stories of bankruptcy to understand the importance of being careful with money.
Make learning enjoyable by using board games. Games like Monopoly, Game of Life, Payday, and others can teach kids important values about money. They help to learn how to manage money, plan for the future, and make good decisions. Kids can also learn about saving and investing in assets like stocks, real estate, and banks. Other games like Settlers Of Catan, Splendor, and Cacao teach children financial skills for making smart choices and investing.
Teaching Kids About Money: Key Takeaways
- Money is an important conversation to have, and it's never too early to start.
- Make it fun and engaging. Use games, stories, and activities to make learning about money fun and interesting for kids.
- Be consistent. Talk about money regularly, and make sure your kids see you practicing good financial habits.
- Be patient. It takes time for kids to learn about money. Don't get discouraged if they don't get it right away.