Financial education is gradually making a place for itself in school education. However, children need to learn how to manage money both inside and outside the classroom. Additionally, they require different kinds of instruction at various stages. So, it is up to the adults to continually take various measures to ensure that children under their care learn about saving, investing, and budgeting. This will help children be prepared to handle financial responsibilities in the future.
Ways to teach young kids about money
Younger kids, from preschoolers to elementary school children, can develop spending habits and understand the value of money. During this period, one can gradually introduce them to the concepts of saving and spending.
1. Allow them to hold on to their money
One of the first steps towards teaching kids about money is highlighting its value. To do that, one could offer kids an allowance for doing their chores, teaching them how to earn and take care of their money.
2. Use a clear jar for savings
Opting for a clear jar instead of an opaque piggy bank allows children to see the money grow over time. As the savings are visible, children get to observe and learn how a few pennies turn into a few dollars over time.
3. Set examples with mindful spending
Money habits are usually built between the ages of 6 and 12. So, when one takes the child out for dinner or to the grocery store, they should be mindful of how they spend money.
4. Play educational games with them
One can try a few money-based games for kids to teach them how to spend and save money. For instance, one could ask the child to help them clip coupons and look for certain products at the store. The task could make them feel like they are helping out.
Teaching middle schoolers about money
By now, children can understand how money works, how it is used, and what they can do with it. So, this would be a good time to help them adopt good money management habits.
5. Explain opportunity cost to them
One can teach an elementary or middle school child about opportunity cost by letting them know what they would miss out on if they purchased another item. For instance, one can explain to the child that if they want to buy a specific game, they will not have enough money to purchase another thing they want, say an instrument or gadget. This example should act as a budgeting lesson, which would help children learn how to compare the costs of different things and make an informed buying decision.
6. Encourage them to save more
Kids are bound to want to spend on things that exceed their allowance. That’s why it is important to teach children how to save enough to afford the things they want. One must create a routine for the child, such as setting aside a small portion, say about 10% of every dollar they receive, including gifts and allowances. This can be a great way to teach kids about money management, financial responsibility, and delayed gratification.
7. Introduce them to investment opportunities
Once children understand how to save money, one could consider teaching them investment basics. Here, one could start by opening a custodial brokerage account for kids or help them purchase fractional shares. This can teach children about how to invest as well as the importance of asset research and management. That said, one must consider the unique tax considerations for custodial accounts before setting them up.
8. Discourage impulse purchases
It is common for children to see something at a store, say a toy or gadget, and plead with an adult to get it for them. Adults around them must remember not to always give in to such demands. In such situations, one could ask a child to use their allowance to pay for such things but also tell them to wait at least a day before they make the purchase. Sleeping on this idea will let the child revisit the decision later and make a more level-headed decision. The child is also likely to forget the urge to buy the item the next day. Ultimately, not giving in to the demand could help adults teach children how to control purchase impulses and spend money carefully.
9. Highlight the importance of giving
Teaching kids about giving can help them become generous, thoughtful adults. For instance, children could be encouraged to help a charity or someone they know by giving them clothes, toys, or money. Through this, children will be able to appreciate the ability to donate and how the act of giving can be rewarding for the donor and recipient.
Teaching high schoolers about money
Teenagers can take on the responsibility of managing their own money given the right guidance.
10. Help them set up a bank account
Adults can set up a bank account for a teenager under their care. This will help the teen hone their money management skills. It may even prepare them to handle a bigger account and other financial instruments as they get older.
11. Teach them about debt
High schoolers must know about debt and its consequences, as they are close to the age where they can get loans for themselves. So, it is important to cover debt sources like credit cards, student loans, auto loans, and personal loans, as well as debt repayment. This will also teach them how to avoid excessive debt and financial burdens in the future.
