The goal of any parent is to prepare children for adulthood. You want them to grow up to be successful, happy and fulfilled adults. Money is a significant part of achieving each of those things. Yet finances are often a taboo topic for many, and you may think children don’t need to be bothered with money. However, it’s something they’ll manage their entire lives.
Unfortunately, children have limited access to financial literacy topics. The Council for Economic Education reports only 17 states require high school students to take a personal finance class in order to graduate. It’s no surprise that 20% of children in the U.S. don’t meet a baseline for financial literacy proficiency, despite the fact that studies show taking at least one course results in higher than average credit scores and lower debt levels later in life.
Whether or not your child is receiving financial literacy education in school, introducing topics at home is a great asset. This allows them a more tangible approach to managing money as they grow. Talking about money with your children doesn’t have to be overwhelming. It can be done quite simply. Here’s when you should introduce money, and simple tips to make it fun for your children.
When should you start discussing money?
It’s common to think later is better, when in fact you want to start teaching your children about money as young as possible.
“You should start teaching your children about money when they become curious about the subject — this generally happens much earlier than parents expect,” says Andrea L. Grossman, a certified financial education instructor at MoneyProdigy.com.
In fact, the President’s Advisory Council on Financial Capability recommends parents start teaching their children about money between the ages of 3 and 5.
Seem too young? Keep in mind discussing money at a young age can be as simple as talking about purchases at the grocery store. The key is to make money a fun topic that doesn’t overwhelm them.
Simple tips to introduce financial literacy topics
Younger children are concrete thinkers. You want to introduce topics that leverage the tangible aspects of money to help them learn.
“The best way to make money a fun topic that will make kids naturally want to learn about it is to engage them around a money goal they have,” says Grossman. You can do this by introducing the concept of wants vs. needs, adds Grossman, and narrow it down to having one saving goal.
Let them handle money or explain purchasing decisions you make to help them form a good relationship with money. Grossman suggest these simple ways you can have your child deal with money:
• Have a family banking day. Everyone deals with their banking needs, from making deposits to looking over accounts to make sure they balance out.
• Let your child manage your receipts. Let them check receipts against your budget. You can even use an app (such as Ibotta or CoinOut) that gives you cash back for scanning receipts, and your child can keep the cash for a goal.
• Have a child look for the cheapest gas. This lets children learn about the importance of savings. Assign each week to a child and have them keep their eyes open for gas prices, or have them use an app like GasBuddy to look for cheap gas prices.
Make sure to personalize any tip to the specific needs of your family. Have your child deal with financial topics as much as possible, and relative to their ability, to help them grow in confidence.
It’s a marathon, not a sprint
Growing in financial literacy is a lifelong process. Your child may or may not get taught about basic topics in school. You want to build on or create a foundation that promotes financial confidence that will continue to grow as they do.
Learning basic savings tactics and wants vs. needs are vital to start with, but don’t stop there. Introduce some of these topics as they become age-appropriate:
• Avoiding debt
• Managing a budget
• Determining if a purchase is a good investment
• Sharing financial responsibilities
• Basic investing
Introducing these topics will provide your child with the skills needed to master their own money when they become adults. And don’t feel like you need to teach everything at once. Give your child an opportunity to build confidence at each step, then introduce more advanced responsibilities to help build confidence.
Teaching your children about money is a necessary step for all parents. Don’t let yourself be overwhelmed. Start with basic principles to build a solid foundation — you’ll be surprised at how well your children can learn to manage money effectively.