Financial Literacy for Kids – Teaching Money Skills to the Next Generation

Financial literacy skills can help prevent individuals from making poor financial decisions when managing credit card balances, student loans or budgets. Financial literacy knowledge also can future-proof retirement accounts while saving money using cost-cutting strategies and money-saving tips.

Teaching financial intelligence to children can be difficult. Many parents use various methods to teach these lessons.

1. Talking About Money

People often feel awkward discussing money. It can be an uncomfortable topic that depends on context and can vary depending on who’s speaking about it.

But financial literacy should be discussed, particularly with kids. Financial literacy gives children the skills they need to plan for future expenses, avoid debt problems and prevent pitfalls such as poor credit scores, bankruptcy and foreclosure.

At an early age, you can begin teaching kids about money by simply explaining that everything costs money. From there, games like GoHenry’s Money Missions can demonstrate how these purchases and financing occur. As children age further they can start earning their own incomes via allowance, chores or part-time jobs and encouraged to save a portion of this earnings.

2. Counting Money

Money counting is an essential functional skill that will enable kids to understand the value of items and set them on a path to learning advanced math concepts such as fractions, decimals and the metric system needed in science and technology classes.

Help children understand that saving for things takes time, and teach them about delayed gratification. Once they realize it took them longer than anticipated to earn enough money for something they want, they will appreciate their new toy or snack even more!

As one way of accomplishing this goal, giving children an allowance and encouraging them to pursue financial goals can be extremely effective. Many GoHenry parents report this approach teaches their kids about budgeting and making tough choices to stretch out their allowance.

3. Budgeting

Budgeting skills are an integral component of financial literacy for children. Budgeting helps kids understand that spending must be limited and that part of their allowance should be saved or invested for future purchases or savings accounts.

Introduce children to budgeting as soon as they reach age five will help them gain an appreciation of what they own and its cost, ultimately making them less demanding as adults. It is also an ideal opportunity to introduce a parent-managed debit card like Greenlight which allows parents to monitor and control spending habits in real time.

Financial literacy is crucial to spending wisely, saving for emergencies and long-term goals, building credit responsibly, and avoiding unmanageable debt. The sooner children learn these skills, the greater their likelihood of having a prosperous future.

4. Saving Money

Children need to understand that not everything they want can always be bought immediately. You can help your children develop this skill by encouraging them to set aside a portion of their pocket money each week and helping them track the growth of their savings with regular counting exercises.

Assist them with setting long-term financial goals by discussing their dreams and the ways they might be achieved through saving, deferred gratification and investing. This allows them to see the big picture and how money can make life simpler – perhaps age appropriate activities such as piggy banks, chores or allowances can further their financial literacy journey.

5. Investing

Many American’s are struggling with too much debt and too few assets, yet financial literacy could be the key to helping people escape this toxic money culture.

Teaching kids how to invest can be an excellent way to help them build up their assets and gain financial knowledge. Furthermore, it provides them with insight into the relationship between earnings, spending and savings.

While children may not understand how to invest in real estate, they can still learn about investing through exchange traded funds (ETFs) designed for kids or UGMA custodial accounts (which require legal custody such as parents). This will teach them that investments can help build assets and fund dreams while simultaneously helping avoid bad debt in future – they will learn that saving is preferable than borrowing!