How to Teach Financial Management to Kids

Jul 1, 2022

5

min read

M

oney has become the lifeline of our existence and knowing how to manage it is a core life skill that kids should learn at an early age. But, people have a misconception that finance is an adult affair. Because of this, children are not taught about finance in school and are not engaged in financial matters at home.

As a result, children enter adulthood without the ability to handle their finances. This can lead to unmanaged debts, financial pressures, and a lack of financial freedom. For this reason, early financial literacy is very important for kids as it molds them to become financially savvy and manage their finances well.

In this article, we talk about tips for teaching kids financial management and resources for it.

Kids with Money — **https://www.freepik.com/vectors/money-illustration**

Tips To Teach Financial Management To Kids

Want Vs. Need

It's crucial to teach the kids the difference between wants and needs. A need is a basic necessity in our lives, such as food, education, healthcare, and other things essential to our well-being. On the other hand, wants are things one desires but are not necessary. It includes anything besides the necessities, such as the latest smartphones, designer shoes, etc.

Kids cannot differentiate between wants and needs. They want everything they like. Thus, you should teach them the differences and ask them if they genuinely need it or not. Controlling one's desires and avoiding unnecessary expenditures is one of the important components of financial management. The sooner a person can learn them, the easier it will be to manage their finances.

Let Them Be Financially Independent

Now, this might sound absurd, and you might be thinking, how can a kid be financially independent. But, as long as kids are not financially independent, they won't realize the actual value of the money. Let them earn their allowance and understand that money needs to be earned. Instead of just giving them the money, pay them for house chores or good exam scores. You can give them allowance based on the complexity of the jobs.

For instance, you can pay $5 to wash the dishes and $10 to cut the grass. This will make them feel they have genuinely earned money and would realize the value of a dollar.

Have Them Track Spending

Tracking your expenses is an excellent way of knowing where your money is going. This helps them understand their spending habits and how to minimize spending to save more money. Kids should record their expenses daily and review them monthly to analyze whether they have spent money wisely or not.

Calculator Characters — **https://www.freepik.com/vectors/revenue**

Three Jars Method

The three jars method helps kids learn about budgeting money. Whenever a child is given an allowance, teach them to separate their money into three jars. Each jar is labeled as save, spend and give. When the children get their allowance money, they should divide their earnings into three different jars. This separation helps teach kids about the budgeting process.

Saving Habits

Teaching children the importance of saving from an early age is essential. Get your children a piggy bank or saving jar that allows them to deposit their coins or cash. You can set short-term or long-term saving goals to motivate them to save. For instance, let them save for a new toy they wanted to buy or let them save for their future education.

Involve Them In the Purchase Process

Parents hesitate to take their kids to grocery stores. Understandably, kids can be a nuisance when taking them to a store, especially when they start crying or rolling on the floors to buy something expensive. But, taking them to purchase items gives them knowledge of the buying process. They can also learn about accounting, inflation, and comparative analysis while making the purchase.

Talk About Money

In many family households, talking about money is taboo. The parents don't want to bring up monetary topics with their children as they are not comfortable and embarrassed about it. It's mainly that they don't feel they know their finances well to teach their children about it. But, it's essential to talk about money with your child as they learn about them from your financial behavior. However, focusing more on positive money stories than negatives is crucial.

Also, it would help if you involved your child in financial decision-making. For instance, if you are considering purchasing a car, ask them which one they would suggest within the given budget. This will develop their economic reasoning.

Show Opportunity Cost

Every expense has an opportunity cost. Kids are very stubborn, and they want everything. They should be taught to analyze which products are better based on the opportunity cost. For instance, if your kid wants a video game, then say they won't get the money for a pair of new clothes. This will let them analyze which is more important to them and determine what to sacrifice. It will help develop their financial judgment and decision-making skills.

Teach Kids About Investing

Investing is one of the crucial parts of financial literacy. It would be best if you taught kids about investing early. Most people think it's too early for a child to learn about investing, but it's never too young to invest. It teaches children about passive income and how they can make money work for them. You can teach them about compounding interest, stocks, and debentures.

Woman watering a money tree — **https://www.freepik.com/vectors/earn**

You can open bank accounts for them or brokerage accounts. Open a modest custodial account with a brokerage and let them assist you in investing decisions. First-hand experience is the best way to educate them about the dangers of short-term thinking and the need for a long-term perspective in investing.

Enroll Them In Financial Education Course

Financial education taught in school is not enough. If you want your kids to learn financially literate, then it's better to enroll them in separate courses. These courses help the kids develop decision-making skills and financial independence. There are various paid and free financial education courses available on the internet. You can enroll them in the class to help them learn about finances and develop the necessary skills for financial management.

Where To Find A Financial Education Course For Kids?

There are vast arrays of options available on the internet regarding financial education courses, including online financial lessons, games, storybooks, and podcasts. They are interactive, rewarding, and based on simulation, making learning easier and fun for the kids. Below are some of our recommendations:

The Mint

Mint has tailored courses for kids, teens, and adults. It has several games and interactive lessons that teach financial education to the kids.

Practical Money Skills

Practical Money Skills has featured personal finance articles, games, and lesson plans to build financial knowledge in the kids. It has interactive games, quizzes, and puzzles that make learning fun.

Warren Buffett's Secret Millionaires Club

Warren Buffet is the wealthiest person in the world and knows finance much better than anyone else. Warren Buffett's Secret Millionaires Club is an animated series on YouTube that features real-life financial scenarios and how to tackle them.

MoneySense

MoneySense is financial education curriculum designed for children aged 5 to 18. It features cartoon characters, games, lessons, and activities to make the learning fun.

Values, Money, and Me

Values, Money, and Me is an interactive storybook designed for kids to teach about money. The story is based on several financial scenarios and how to tackle financial dilemmas.

Money time

Money time is an online financial literacy course designed for kids. It teaches about key financial principles and skills required to make financial decisions.

Zogo

Zogo is an interactive financial literacy course that offers over 300 modules to learn several financial topics, including investing, credit scores, and mortgages. The best thing about the course is that you earn virtual points after finishing, which can be redeemed as gift cards at Starbucks and Amazon

Money With Mak and G

Money with Mak and G is an audiobook that aims to teach several financial topics through the conversation between a child and his father.

Monopoly

Monopoly is an interactive board game that teaches the kids about investing and making financial decisions. It develops the analytical and decision-making skills of the kids.

Stock Market Game

The Stock Market Game is an online simulation game designed to teach the students about the stock market. It explores the global capital markets, economics, investing, and personal finance.

Conclusion

Kids are taught several things at school and at home, including science, maths, English, etc. But, one of the important subjects always gets left out. It's financial literacy and education. Finance is a pervasive part of our life, and kids should be taught how to manage their finance well. Fortunately, there are various resources available on the internet that aims to teach financial literacy and education to kids. Teaching the kids financial management from a young age is preparing financial savvy people for the future who can have complete financial freedom in their life.