It’s crucial for your family to know the basics of financial literacy, but how do you approach teaching them? Luckily, you’re making financial decisions every day—you simply need to let your kids in on the conversation.
What is Financial Literacy?
Financial literacy includes many different financial skills and concepts. To be financially literate simply means having the know-how to make wise decisions with your personal finances. This includes actions like managing a budget, borrowing money, paying for insurance, and saving for retirement.
Teaching financial literacy doesn’t have to be a formalized lesson for your family. Experience is often the best teacher. You can give your children that experience by involving them in a way that is appropriate for their age.
For example, a trip to the grocery store is a great time for a child of any age to get some practice.
- Pre-K and Early Elementary School: Explain that everything you’re buying costs money. When you check out, let your child swipe the card or hand the money to the cashier and explain the transaction.
- Elementary School: Give your child some money to be in charge of while shopping— maybe $2-$5. Explain to them that they can spend that money however they want while showing them tradeoffs. For example, getting multiple inexpensive things means you can’t get one expensive item or vice versa.
- High School: Let your teen take control of the groceries for one trip. Give them a budget and a list of things that you need. From there, let them manage the money for that trip and the best way to divide it up. For an extra challenge, you may include that you need “snacks for lunches,” but let them decide what exactly that means. If they buy too much or something too expensive, they won’t have enough left over for the other essentials on the list.
The key with these examples is getting your kids used to thinking about a budget and considering how much things cost when making decisions.
Have Some Fun
Many find that talking about finances causes either boredom, anxiety, or both. But it doesn’t have to be that way, especially not for you and your kids. Managing your finances correctly allows you to look forward to things like a new home, that vacation you’ve always wanted, or a fun night out with loved ones. Of course, it’s important to balance any conversations with the appropriate warnings and precautions, but the goal is to get your kids excited about the possibilities.
If you’re looking for some help in adding fun to the conversation, consider giving the Banzai Courses a try, which balance fun and education with choose-your-own adventure type options that allow kids to make financial decisions and manage their own budget.
Don’t Be Intimidated
Financial literacy covers a huge range of topics, some of which can get pretty complicated. Thankfully, you don’t have to be an expert on everything in order to start the conversation. The more you’re willing to open the conversation to your children, the better foundation you will give your kids for the future. This could mean getting into a discussion about 401Ks, taxes, investments, housing costs, and plenty of other topics.