Teaching Kids About Money Management: 5 Steps To Instilling Financial Literacy From An Early Age

All responsible parents seek nothing but the best for their children. They seek to witness their children grow into successful, responsible young adults who can confidently take on the challenges that life will pose to them. This can only be achieved by inculcating good habits in children from a young age, and financial literacy is one such must-have skill that must be instilled in children by parents as early as possible.

Teaching kids about proper money management skills from an early age enables them to make wise decisions and develop healthy financial habits. In this blog, we will explore a few reasons why this is important, along with 5 steps to help you get started on the same.

The Importance Of Money Management Skills In Children

Helps Build A Strong Foundation - Teaching kids about money management from a young age lays down a solid foundation for a lifetime of wise financial decisions. Introducing basic concepts of finance such as savings, budgeting, cashflows, and differentiating between one’s wants and needs can go a long way in helping your children understand the value of money and teach them to use it smartly.

Builds Independent Adults With Healthy Habits - With the understanding of money management, kids become financially independent earlier on in life. They learn to do proper research and make informed investment decisions instead of depending on others.

5 Steps Towards Building Financial Literacy In Kids

1. Introduce The Concept Of Money - Teach your children about the concept and value of money from an early age. Explain how different denominations work, as well as how money can be exchanged for goods and services across various life scenarios. Taking your kids on a trip to the Grocery Store could be a great start for this!

Introducing your kids to the ideas of short-term and long-term financial goals can go a long way in helping them plan out their finances when the time comes. While short-term goals should cater to their near-future plans like going on a short trip or buying a gadget, long-term goals usually revolve around significant milestones in their life, like getting married or saving up for retirement.

2. Teach The Concept Of Savings - Enable your children to save money for their goals. This will help them understand the value of delayed gratification as well as the power of savings. Teach them to save a part of the money they receive, and help them buy toys or goods they would love at a later point using the savings. Using the traditional piggy bank might prove to be an exciting way of building on the habit of savings. You can also check out interactive apps and software that let kids enjoy the piggybank experience at their fingertips. Digital Piggybanks are applications and software that replicate the age-old piggybank experience on a smartphone. Fam, Junio, and Wizely are a few options that you can explore. 

Tell your children that it is okay to wait for something they want instead of getting it immediately. Take Video Games or Toys as an example - encourage them to save up for them over time and work to achieve the said goal over a realistic timeframe instead of purchasing them outright. Such lessons would teach your kids the values of patience, inculcate discipline in them, and establish a feeling of achievement when they achieve the long-desired goals that they worked for.

They would cherish the feeling!

3. Budget Cashflows - Teach your kids that cashflows are a finite resource that needs to be budgeted wisely. This could also help them understand the concept of spending money on one’s wants rather than their needs. Also, teach them to track their expenses and budget their allowances/pocket money based on the same.

4. Personal Finance Content For Kids - Kids love learning from interactive content sources, be they illustrated comics or video presentations. You can buy personal finance books that are specially designed for young minds, or you can make them watch personal finance videos that are easily available on the web these days.

This will help them develop the habit of reading up and keeping updated with financial news and strategies.

5. Be A Role Model - Children learn from what they see more than from what they are told. Demonstrate good financial habits such as budgeting, saving, investing wisely, and avoiding impulsive spending decisions. Involve your kids in decision-making processes and value their opinions. These lessons would carry bigger value when they see them being implemented by someone they look up to.

Reliable Online Resources For Financial Literacy

Raising children can be a thoughtful journey in all aspects, and one does not necessarily have to go through it alone, especially in this day and age. Here are a few good online resources to help support you in your efforts to raise Financially Literate Children:

Practical Money Skills a website, made by Visa, works for children of all ages and provides them with interactive games, lesson plans, and tools to help children develop essential money management skills. It is also available as an iOS and Android app.

Money As You Grow is an official website of the United States Government that provides lessons on money management that children and parents can navigate together at their own pace.

Junior Achievement is a US-based NGO that is dedicated to educating students with invaluable lessons on financial literacy and entrepreneurship. Started in 1993, they have a proven track record of doing a good job owing to their consistent efforts in the same.

Additionally, you can explore platforms such as Instrucko and Upsurge that offer financial education for Indian children.

 Conclusion

Inculcating the skill of Financial Literacy in your children can truly go a long way toward a secure future. Money is a valuable resource and the sooner your children are taught the value of the same, the better. Learning what to spend on, what brings value to their lives instead of pointless purchases, impulsive buying and can help them stay financially protected across all economic climates. While Financial Literacy is a lifelong journey, simple steps can help your children get started on an important journey that they will value throughout their lives. Sign up on Grip to stay updated on the latest financial advances and concepts.

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