Financial literacy refers to one’s ability to obtain and apply a robust range of financial skills in a prudent way. That includes budgeting, investing, using credit, and overall money management. If you know Moves, you know those are all the things we talk about. Most adults strive to become more arduous in their own acquisition of financial literacy, but it can be tough. A 2018 FINRA study found that over 90% of adult Americans feel somewhat anxious or stressed to ponder their finances. What’s worst, over 50% of workers earning between 50K-100K in their annual salary live paycheck to paycheck! While the numbers are present, the security is not.
The bottom line is that financial stress can be heavily mitigated by the acquisition of financial literacy. So then arises the question: What is the importance of teaching kids about money? Moreover, when to teach kids about money? The younger working generation between 18-35 years old reported the most financial stress in the previously mentioned study. There is undoubtedly a huge benefit to preparing for life’s financial challenges early on.
In this article, we aim to educate our readers about the importance of financial literacy for children. We’ll also introduce how to teach lessons about money, providing some great resources along the way.
Financial Education for Kids
There has been a boatload of studies conducted on the importance of financial literacy for children. One Cambridge study found that recurring money habits were formed in children as early as age 7! In sum, research surrounding teaching children about money and its effects come back positive. Those who learn about how to manage money are far less likely to require payday loans. They begin to respect the value of money and thus acquire the best tips on frugal living, naturally. There’s also a positive correlation to the accumulation of assets by age 25.
Among the United States, not all states mandate financial education. The ones that do, however, have reported positive finds. Finance-education mandate states saw an increase in credit scores after changing their schooling requirements, introducing such courses. There was also a notable drop in delinquency. Additionally, students became more likely to apply for financial aid and avoid the extra burden of personal debt. Since 2013, the Consumer Financial Protection Bureau (CFPB) has been fighting for such regulations in elementary schools in all 50 states.
Financial education for kids is a natural contributor to economic success. Those invested in its influence have found it to be just as contributing as any other learning prerequisite. And just like anything else, the earlier the learning begins, the better it will stick.
How to Teach Kids About Money
The best way to teach kids about money is to first understand what it is being taught. For any looking for a financial literacy refresher course, check out the best personal finance books and podcasts for this year. In the meantime, implement some practical roles into your child’s environment which encourage financial literacy for kids. Hand out allowance for tasks performed with full effort, even at an early age. It doesn’t have to be a large amount either. The goal here is to build a mindset toward financial literacy. Talk with your kid(s) about their financial goals and the importance of saving. Invite them to separate their allowance into ‘save’, ‘spend’, and ‘give’ categories. If they have no idea what you’re getting on about, introduce them to these concepts!
Inclusion is the next important checkbox for how to teach kids about money. Tell them exactly why big house purchases should be thought of as long-term investments. Show them the ledger when you shop for groceries. Calculate how long those groceries lasted, and point it out. Ask what each family member thinks is important as far as the best way to use money. These kinds of mental exercises imprint a financial statement that can be readdressed and refined forevermore.
Last but not least, invite real-world money management situations into the equation. This is probably best conducted with older kids. Sit them down once a week to take a look at bank statements, a budgeting plan, or whatever. Think of it as a class, and advise them to do the same. You can even offer to give them something (like money) for their time investment. Define important financial concepts and terms. When the time is right, you may even want to help your child(ren) open a savings account.
These small actions may seem redundant, but they’re really essential financial tips for starting a small business. And even if it never gets that far, at least they’ll know how to handle their own personal business transactions. In the next section, we’ll discuss some resources which help teach children about money.
Best Resources for Teaching Financial Literacy to Kids
InCharge is an online platform for debt solutions with tons of great free information around financial literacy. They provide guidelines and even lesson plans and activities for teachers. What’s great is that their content focus is divided by age, so it’s easy to source the appropriate literacy level. That’s including pre-school-aged kids when introducing these concepts can pose the greatest challenge. Lastly, they have a fun course called “using comic books to teach financial literacy” which is just as cool as it sounds.
PiggyBot is a parent-designed app for children from ages 4 and up that helps kids save, spend, and share their allowance. It’s interactive, easy to use, and keeps track of all transactions. Best of all, it’s free. Everything moves virtually in PiggyBot, which is great practice for the real world. Parents also choose how much control (if any) they have over their child(ren)’s virtual account. It’s a strong habit-building too for greater financial literacy.
Econedlink is a fully comprehensive website with loads of webinars, videos, lesson plans, and activities for grades k-12. Their interface is straightforward and very easy to navigate. The absolute best part is the search feature, which allows for precise filtering when searching for a lesson plan, activity, etc. They’ve also got family resources and a helpful support team.
4. Fiscal Tiger
Fiscal Tiger has a ton of free and paid resources on how to teach kids of different age ranges about money. It’s like a small encyclopedia of greater financial literacy resources. Sections are divided between toddler, elementary, middle school, and high school level information. It’s definitely worth a browse if you’re hungry to explore the most well-vetted programs available at this time.
For more financial tips and resources, check out some of our other blog posts! You work and live differently, and that’s why Moves is here to support you every step of the way.