Many of us reflect on goals and opportunities in the new year. Lose a little weight, read a few more books, find the perfect job. And, after the arrival of December’s too-expensive VISA bill and its complimentary heartburn, we might add improved finances to our list of resolutions too. This year, rather than wearing out the old “money doesn’t grow on trees” adage, make financial literacy a goal for the entire family.
For generations, money talk was taboo, a closely-guarded private matter. And, what most of us learned about money, we learned through our own experiences and failures. Without formal education in finance, today’s parents, though more willing to open discussion, often do not feel qualified to lead the conversation. However, these exchanges are vital to our children’s futures. In fact, a University of Cambridge study found that financial habits are set as early as age seven. (investopedia.com) But where do we begin? Why not try one of these five ways to raise more financially literate children and have fun as a family too?
Learn to earn. Children love games, so make earning fun. Chart their earnings with stickers or e-wallets. Develop a family financial goal and enjoy the competition of earning toward it. Many parents provide allowances for their children, but earning allows children to experience cause and effect. Earning opportunities promote self-reliance and give concrete evidence that income directly correlates to personal effort. Children working toward a financial goal learn to budget in small increments.
Never fear; caregivers who do not carry cash need not stress over constant, frequent, and small transactions. Whether families choose to use “play money” (to be cashed in monthly) or one of the several apps available for money transfer, earning is easy to track and fun to do. And if your children are just beginning to understand money, play with it! Play restaurant at dinner. Play store during pick-up time. Count money. Explain how to use money, how to get change, where money comes from, and where it goes when using “Mom’s card.” The bottom line, take the mystery out of money by learning to earn and learning the power of earning every day.
Seek outside-the-home part-time opportunities to earn. Teens are busy. Schools, extracurriculars, and sports are time-consuming. But, most teens can still squeeze in at least an hour or two of work each week. Those jobs are critical for adolescents who need to learn the value of money. When an hour bagging groceries yields the price of one large iced coffee, teens are less inclined to spend their hard-earned money frivolously and more inclined to respect the value of money.
Get bank acquainted. With digitized money and online banking, many children have never seen the inside of a bank. Encourage them to visit the bank with you and set up savings accounts in their names. This motivates children to save, and it demystifies the daunting banking system. Understanding how banks work and what services they provide better equips your children to leverage those services in the future.
Share the wealth… well, the spending of it, anyway. In our house, children receive gifts at Christmas and on their birthdays. Other than that, discretionary spending is nearly non-existent. When our kids wish to make luxury purchases, they must contribute toward the expense. This provides a sense of what special toys or sneakers cost, and if kids must put their own skin in the game, choices are felt more acutely. It’s harder to spend money earned than money freely given. Those tough decisions allow for conversations and create opportunities for children to formulate priorities.
Talk about money. Granted, children don’t need access to our accounts, but having honest conversations about budgets and expectations is important. Children are far more receptive and accepting of financial conversations than you may think. They can comprehend the importance of cutting back, making purchasing decisions, and prioritizing financial responsibilities.
Children can understand what we must pay, how that determines what earning opportunities we can invest in, and finally, what is left to spend on luxuries for ourselves. It is equally important to discuss what you are willing to pay for versus what your family is not. For example, hiring a cleaning service for your home rather than cleaning it on your own lends to a great conversation about opportunity cost. What are you giving up by spending that money? What is the cost of NOT hiring the cleaning service?
Ultimately, life is not just about making money. True financial literacy is about making choices. So, whether your goal is to practice self-discipline through saving, learning patience through delayed gratification, or supplying opportunities for your family to grow in security and independence, growing your children’s financial literacy most likely fits the bill.