Ways to raise a financially literate child
With the goal of financial literacy in mind, consider these four strategies to help teach your children how to best manage their money. They are simple and effective.
- Create a financial mission statement for your family. Solicit input from your family about what each member thinks is important. Is it eating out, taking vacations, saving for college, or all of these goals. Have an open conversation with your spouse and children to encourage them to think about the meaning of money, the challenge of earning it, and the importance of saving for what they truly value.
- Take opportunities in your daily activities to model how you make spending decisions.By discussing money-making decisions as you shop, cook, and pay bills, you provide concrete examples that your children can model. Plus, taking the kids to the grocery store and cooking dinner afterwards teaches them to apply their math skills in the real world. You might encourage them to compare the costs of the meals they help prepare at home to what the meals might cost at a restaurant or fast-food establishment.
- Give your kids opportunities to earn money. Consider the idea of paying an age-appropriate allowance to your kids. Whether you believe that it’s better to tie an allowance to doing chores, or to give a small stipend without conditions is a matter of constant debate. Either way, an allowance is a great way to teach kids how to handle their own money
- Allow children firsthand experience in saving and spending their own money. Open a savings account for your children early, and consider allowing them to manage the records. They can monitor their savings activity over the years. By the time they become teenagers, the benefit of saving regularly over time will be apparent, because they will have some money to spend on clothes, food, and friends and still save for college. And by the time they head off to the University, they will be more likely to have a savvy sensibility about managing their expenses.