Teaching Kids About Money Is One of the Best Gifts You Can Give Them
You may feel like handing your kids some extra cash is a nice gift. But teaching them to use that cash is the better gift.
Financial literacy for kids and financial literacy for teens creates grown adults who feel confident about managing their money.
If you want to start teaching kids about money but are not sure where to start, this guide on finance for kids is just for you.
We will give you:
- Tips on teaching kids about money for young kids, older kids, and teens
- Resources to boost financial literacy for kids and financial literacy for teens
- An intro to teaching investing at a young age to make young investors
By the end of this guide, you should have a clear idea on ways to promote financial literacy for kids and financial literacy for teens in your own home.
What Is Financial Literacy for Youth?
Since we will be talking quite a bit about financial literacy for kids and financial literacy for teens, let’s make sure we understand exactly what that is.
Financial literacy is simply an understanding of money and how it works. This includes earning, spending, saving, investing, debt, credit, retirement, and much more.
When it comes to teaching kids about money and promoting financial literacy for youth, all the lessons stack up a little at a time.
That is why we have broken down our tips on finace for kids into these categories:
- Little kids
- Older kids
No matter which age your children are, you will find tips, resources, and strategies for learning investing young.
Teaching Kids About Money: Young Kids
Finance for kids – especially your little ones – may seem like a useless pursuit when you pay for everything and are just concerned about teaching them to tie their shoes.
But the earlier you start teaching kids about money, the more likely they will end up as responsible adults who can manage their money with confidence.
Here are some top finance for kids tips to practice with your little tots:
- Savings: Financial guru Dave Ramsey suggests parents should ditch the traditional piggy bank and give their kids a clear jar for savings. This way, teaching kids about money and savings is something they can see. The money visually adds up.
- Identification: Make sure your little kids can identify coins and paper money. Also make sure they understand that just because a coin is bigger doesn’t mean it has more value (such as a nickel vs. a dime).
- Coupon: Kids can practice their scissor skills (with safety scissors, of course!) and learn about saving money by helping you coupon. Talk about the symbols and numbers to promote financial literacy for kids.
Teaching Kids About Money: Older Kids
Teaching kids about money becomes easier as they grow up. Older kids can start understanding big concepts like value and earning.
Here are some top financial literacy for kids tips to practice with your older children:
Give Real-Life Experience: Let them save up their money, take that money to the store, and buy something with the money they saved. They will better understand the value of money when it is their money they have spent.
“If This, Not That”: When it comes to explaining finance for kids, make sure they understand the idea that money is not unlimited. You make choices. Tell them if they buy this one thing, they won’t be able to buy that other thing and help the weigh the decision.
Encourage entrepreneurship: Kids often come up with all sorts of wacky and interesting ideas to make a little business. As long as there are no safety concerns, encourage them in their pursuit so they can learn about profit, margin, loss, and more.
Financial Literacy For Kids: Resources
Now that you have read some tips on teaching kids about money – both little ones and older kids – here are some helpful resources that will help promote financial literacy for kids:
The Mint: Not only does The Mint offer articles for teaching kids about money, they have interactive games kids can play to learn as well. You can find the “Be Your Own Boss Challenge,” the “When Will You Be A Millionaire” savings game, the “What Kind of Spender are You?” quiz, and more.
Financial Peace Junior: Dave Ramsey’s popular financial peace course has a companion for ages 3 to 12 to teach financial literacy for kids. The set includes an activity book, video lessons, a chart, stickers, chore chart, and envelopes for giving, saving, and spending.
Books: Investopedia has a list of six great children’s books for kids 2 to and up that promote financial literacy for kids.
Teaching Kids About Money: Teens
Once your little ones become teens, teaching kids about money takes on a whole different meaning. Now they will start having bank accounts and debit cards. Soon, they will be on their own and faced with credit cards and loans.
It is imperative to teach financial literacy for teens, so here are a few tips for teaching your teenagers the intricacies of money:
Bank Account: By their teen years, all kids should have a basic bank account to start learning the basics of money management at a bank. A debit card you supervise can be a good intro into spending without cash. Credit cards should be avoided.
Budgeting: One of the most important factors of financial literacy for teens that will lead into financial literacy for adults is budgeting. Take their allowance or their work money totals, and then sit out with them to determine how much is spent, how much is saved, and how much is given.
Encourage a job: While some students’ school schedules will not allow for a regular part-time job, there is no reason they cannot get creative in finding ways to make money. From traditional babysitting and lawn care to modern Etsy creations and freelance tech help, teens have plenty of opportunities to earn.
Financial Literacy for Teens: Resources
Now that you have read some tips on teaching kids about money – this time for your teenagers – here are some helpful resources that will help promote financial literacy for teens:
The Mint: Not only does The Mint have finance for kids’ topics and games, they also have resources for teens. Teenagers can read articles on spending, tracking, giving, and even investing at a young age. Interactive tools like the “Compounding Calculator” help teens understand these concepts.
Books: Investopedia has a list of 7 books about money that promote financial literacy for teens.
Graduate and Start: For your older teens about to enter college, Dave Ramsey has a book and course you can buy to teach kids how to enter their college experience and start their adult lives with sound financial literacy for teens.
Investing at a Young Age: Kids
Another aspect of financial literacy for kids is investing.
Image Source: Creative Commons
Teaching the concepts of investing young is an invaluable lesson you can give to your kids. Here are a few age-appropriate ways to start teaching investing at a young age with your children.
Play Stocks: Kids do not need to be investing their allowance into stocks, but that does not mean you can’t make a game to teach investing young.
Each member of the family can pretend to have $100, and they choose which stock to “invest in.” Though no money is actually involved, you can make it a race to see whose total is highest at the end of three months.
Invest Your Money: If you have disposable income that you would normally give your kids to spend on yet another video game or even more toys, why not start an investment for them?
Include them in the process so they can learn about investing at a young age. In the end, they will have a nice college fund.
Investing at a Young Age: Teens
Unlike kids who simply need to learn about investing at a young age, teens can actually become young investors. If you want to help them start investing young, here are a few tips to follow with your teenagers:
Begin Retirement Savings: The maximum yearly investment for a Roth IRA is only $5,000. Many teenagers would be able to hit that mark, or at least half of that mark, if they save wisely. Remind them that investing young in retirement means more wealth and a potential younger retirement age.
Start Investments: U.S. News recommends starting young investors with exchange-traded funds or index funds. Allow your own financial advisor to offer some advice that may help your teen, too.
Not only does investing at a young age offer financial literacy for teens, it also sets their futures up for immense success.
In fact, here is a chart showing that young investors starting at 19 vs. starting at 27 can end up making millions more.
But What if Mom And Dad Aren’t Sure About Finances?
In order to bring financial literacy for youth, parents need to have financial literacy themselves. If you feel ill equipped to teach your kids about money, you are not alone.
One study showed that over half of American adults could be considered financially illiterate.
Here are a few top websites that will teach you more about your own money, so you can start teaching kids about money:
The more you understand finances yourself, the more you can start understanding finance for kids and teaching kids about money.
Read More: Retirement Planning: A Shift in Paradigm
Conclusion: Finance for Kids
Now you have some tools for teaching kids about money. We have talked about promoting financial literacy for kids and financial literacy for teens. And we gave some practical tips to create young investors.
On top of these finance for kids tips, don’t forget to simply talk about money and finances with your kids.
While you do not need to unload every burden, having open discussions about the way you earn your money, the way you spend your money, and the way you save and invest your money will be a constant stream of teaching kids about money.
Little by little, everything you are doing to bring financial literacy for youth will soak in to their brains and benefit their lives.
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