Benjamin Franklin once said an "investment in knowledge pays the most interest." So it is true for financial literacy. Setting your child up for a strong financial future is a process that can begin at an early age. Here are four tips for teaching financial literacy to your children:
1. Let Kids Experiment
One effective way to help kids learn how to make budgets is to give them a chance to make mistakes on their own. A small allowance each week is the perfect incentive for children to learn how to budget. Do they want to blow this week's money on candy and a cheap toy or save up a few weeks to get something they really want? Of course, some children will still be impulsive and want to spend their funds right away, but better they learn to make mistakes with $10 than $10,000.
2. Share what you know
What are the most important money lessons you learned? We all learn from our experiences. Sharing those money lessons and experiences is a great way to help kids develop financial literacy. After all, I'm sure most remember the money lessons our parents taught us - or didn't teach us! In our house, I pick topics from time to time on various money matters to help get the kids familiar with money issues. Topics like "what is a bank?" or the difference between a "credit card" and "debit card." Keep it light, but try to get the main points across.
3. Gameify It
Kids love games. There are money themed board games, apps, and all kinds of tools today. Our family loves Monopoly. It's a great way for kids to learn about investing, risk, and getting them interested in owning properties. You could even encourage older children to learn lifelong investment skills by participating in a stock trading simulator such as The Stock Market Game.
4. Make Them Earn It and Invest it
One of the best things you can do for your children is to instill a good work ethic in them by letting them earn money on their own. Whether your teen works part-time at the movie theater or you help your little ones start a lemonade stand, the willingness to work hard and be rewarded is one of the best financial lessons you can pass on to them. Once they earn the money, consider using an investment account to teach them about earning interest and dividends.
These tips are only the start. Use the opportunity of teaching your kids about financial literacy to learn more about it yourself!
Share with me how you teach your children about money: firstname.lastname@example.org