Children learn a lot from what they see – it’s called social learning. Traditionally, kids are taught about various subjects such as science and math. However, a subject like money is rarely taught in regular classes or in the general curriculum. This is something we’re looking to change here at the YFL Foundation.
Considering the real-world importance of money, kids should be taught about it right from their childhood. Financial literacy at an early age will adequately prepare your child to earn and use money with a proper understanding of its importance.
Below are the top 5 lessons to teach your child about money:
1. Teach your children the value of money
The first lesson you should start teaching your child is the value of money. You can do this by giving examples of items and how much worth they are in terms of money. For example, you can tell them what a toothbrush is for and how much it is sold. You can also tell them what a computer is used for, and how much it costs.
2. Teach them how money is earned
Youth Financial Literacy (YFL) starts by explaining to kids how money is earned. During their early years, children often receive money in form of Christmas cards, birthday cards or some kind of allowance. However, you have to let kids know at that particular time that money doesn’t come that easily. It needs to be earned.
Teaching your kids how to earn money is a big step in the process of early financial education. A simple way to teach this lesson is by giving them odd jobs to do and pay them thereafter. These tasks should not be ordinary household chores but rather jobs that would normally be done by someone you’d usually hire, such as mowing the lawn or washing a car.
3. Teach your kids how to save and invest
Most kids grow up without knowing how to save and invest simply because their parents never do. However, it is important to put your kids on the right track for financial success by showing and encouraging them to save money for future use.
A good way of doing this is by telling them to always save a certain percentage of any money they earn. You can make it even more fun by allowing them to decorate savings containers labeled “spend,” “save,” and “give”. Take the same opportunity to distinguish between saving and investing.
4. Coach them on budgeting and borrowing
The YFL program also involves teaching children how to budget and borrow money. For example, give children a budget showing how much you are going to spend on certain items for them and let them decide if they would want to use their own money to purchase the items.
Besides budgeting, borrowing is another concept that should be included in your child’s financial knowledge. Try to explain to them about credit reports, credit scores and what is required to get and maintain a positive credit score.
Besides budgeting, borrowing is another concept that should be included in your child’s financial knowledge.
5. Let your children understand that money is not everything
Finally, teach your children that money is not everything. This is one of the most important lessons in financial education for your children. Sometimes we get so obsessed with money to an extent of idolizing it.
However, you should make your children understand that money is just a tool for purchasing. Emphasize that there are more important things than money, such as family and friends. They should know that having money is important, but it is not everything.
In general, financial education is very important to our kids. Unfortunately, parents often tend to assume these simple lessons, oblivious of the future consequences of not teaching them. It is important to instill these important lessons in your children while they are still young.