Useful Tips for Teaching Kids About Financial Literacy

Useful Tips for Teaching Kids About Financial Literacy

Financial literacy involves having a good knowledge of financial concepts and risks. People with financial literacy have the skills to make effective decisions about money in a wide variety of situations.

Unfortunately, financial literacy among children and teens is in decline in Australia. According to Scott Pape, author of The Barefoot Investor, kids are not learning the required skills at school to become financially literate. This is further exacerbated by the proposed national curriculum which does not have an independent strand devoted to financial skills. 

100,000 people recently signed Pape’s petition to bring about a ‘financial revolution’ in education. The good news is there are many actions parents can take to assist kids to develop good habits and skills with money. 

Talk About Money

The first step in developing financial literacy is to talk with your child about money. When you discuss finances with kids from an early age, they gain awareness of where money comes from and how to make the most of it.

When children ask for things they can’t have, gently explain that money is not an endless resource but one which needs to be utilised carefully. Explain that you only get paid a certain amount, and that this needs to cover all the basic life expenses first. This helps kids understand the difference between wants and needs. 

Give Pocket Money 

Children who earn pocket money from a young age quickly recognise the link between working and making money. Rather than paying them a set amount each week, it’s helpful to pay for each task so they can calculate what they’ll earn.

Also give them the opportunity to make more by doing additional chores. This encourages kids to put in extra effort for financial reward. It’s also great for maths skills, as children can work out how much work they need to do to buy something they want.

Open an Account 

Parents often despair at the way children spend the money they’ve earned or been given for birthdays and Christmas. It’s important for children to make their own choices as this is the only way they’ll learn to manage money.

One of the best ways to encourage savings is by opening a bank account for your child. When kids see their money accumulating it inspires them to save more. Learning about internet banking is not only a valuable skill, it’s also fun.

Help Kids Plan 

Involve your child in the family budget to teach them about financial planning. Show them the bills and how you allocate funds so they can see exactly where the money goes each week or month.

When they want to purchase something, help them do research online so they can find the best deal. Plan a budget so they can work towards a goal. There are some great budgeting templates for kids available online for free. 

Visit Thrift Stores 

Many of the items kids want to buy can be purchased at thrift stores, or second-hand online for a fraction of the cost. Encourage your child to consider buying used items to not only save money, but also help the environment. 

To nurture this mindset, regularly take your child to thrift stores and help them search online for second-hand bargains. Seeing how much money they can save this way is very motivating for kids.

Kids should learn about financial literacy from a young age.