Giving The Gift Of Financial Literacy To The Next Generation

Our children’s financial habits start forming at a young age – when kids are about 6 or 7 years old. Our kids are not taught how to earn money, how to save money, donate money or invest money. Most importantly, they are not taught how to value money and so ultimately, they go into their adulthood with a serious lack of essential financial skills that could change the trajectory of their lives.

Americans Are Barely Passing

Here are some statistics that underscore our critical need for financial education in the United States:

• • • 59% of parents are uncomfortable talking about money to their kids.
    • Only 22.7% of graduating high school students have taken a personal finance course.
    • More than 30% of adults in the U.S. didn’t have enough in savings in 2021 to cover a mere $400 expense in an emergency. The most common response in dealing with such an expense was to use a credit card.
    • The median retirement savings for Americans between the ages of 55 and 64 in 2021 was $134,000. This would provide an estimated annual income of about $7,500 per year (or about $625 per month) for men and an estimated $6,975 annually for women (or about $581 per month).
    • Since the 2020 CoVid pandemic, 63%% of Americans said they were living paycheck to paycheck.
    • Only 23% of states require students to take a personal finance course as of 2022.
    • The U.S. ranks 14th in financial literacy worldwide.

Having financial knowledge is power but our children are being woefully underserved as far as financial wellness is concerned. The good news is that it’s a great time to start creating teachable moments that will help instill good financial habits for your children of all ages. Parents can be the frontline for our children to start their financial planning education so that they can start developing a strong foundation of behaviors, habits, and skills that they can build upon and carry with them for the rest of their lives.

Why Financial Literacy Is So Important For Kids

Financial education can impact your child as they move into adulthood. Having financial literacy can affect various aspects of your child’s life as they progress through life from their relationships and their self-confidence to their overall ability to have fulfillment in their lives.

Learning financial literacy at a young age helps children with decision-making skills. It teaches children the importance of being thoughtful about money. Financial literacy for children teaches them about the importance of earning, saving for retirement or emergencies, donating to contribute to help others, and how to grow their money.

Financial literacy not only builds your children’s skills but it can also build their self-esteem tremendously throughout their lives.

How to Get Started

A great way to get started with financial education with your children is to talk openly and often about money and include the whole family.

Money has always been a topic that was shunned from children’s involvement, and we’ve learned that there are healthy ways to involve your kids in learning about money.

You can start by having regular discussions and teaching moments around money habits. For example, you can share a few electric bills with your kids and explain why there is a difference in one bill over another and how usage and disregard for leaving lights on can cause a bill to increase. You can then teach how they can all pitch into helping the family keep the electric bill down by being more conscientious about electrical usage.

Other Teaching Moments

Other teaching moments can be done when you are grocery shopping. For example, have your child pick out a carton of eggs from a few selections you would purchase. Talk to them about their reasons for choosing that particular carton of eggs then go into the difference in quality and cost and the unit costs and why you personally would choose one over the other. This helps teach money management at an early age.

Another activity can be when you’re doing some school supply shopping with your tweens and teens, you could tell them how much money they are allowed to spend and let them decide (with your input) what they would purchase with the budget. By giving young kids small amounts of money that they are responsible for helps them to keep in mind that there are limits to spending and that there are financial responsibilities for everyone in the family – not just the adults.

Include everyone in the household in these exercises. Including kids of all ages in these types of exercises helps to create a household where everyone becomes more conscious of their money habits. This is one of the best ways to create positive accountability for the others in the family.

Many parents feel they need to leave younger kids out of the money topics, but as you can see from these simple discussions and exercises these talks can be very powerful without being scary.

Teach Your Kids How to Earn

The first step can be to give your children a way to earn their own money so that they can learn how to make good money decisions. An allowance can be an excellent way to start that learning process. Start by giving them the opportunity to earn their allowance with chores they can participate in.

Children should learn the value of a dollar and that money is earned and not just given. There should also be chores that children should be expected to do around the house without compensation to help teach them that they have a responsibility to the other family members. But if they want an allowance, with their own spending money, they need to complete a certain set of chores.

Raises in allowance should be given as the responsibilities increase. Likewise, if your child wants more allowance, you might want to encourage them to get a part-time job or a side hustle to help them earn more money. You can create financial lesson plans around your kids’ allowance that will help them develop healthy earning and spending habits early on.

Teach Your Kids How To Save

Your children’s early experience with money likely revolved around spending money and not learning how to save. That is why it’s important at a young age to show them the importance of how to regularly put money away in savings.

Learning to save is a critical money habit that will help your children understand discipline and delayed gratification. The ability to save will ultimately help them feel more secure and independent and will become a natural practice for them once they grasp the importance of having savings.

Your children can become proficient in saving by giving them a piggy bank or you can open a savings account for them so that they can see their money growing.

Making Financial Education Fun For Your Kids

Another idea is that you can create little fun exercises for them by having them save for something they really want like some video games or a toy as a way to teach young children about the importance of financial goals. When they make their own financial decisions around the importance of budgeting their savings, it helps them create a set of priorities and good habits around having a limited budget for spending. These are important lessons in the basics of finances.

Get your children excited about watching their money grow in their savings account or piggy bank and praise them often for their efforts in their ability to save. Also, you can match a portion (or all) of their savings to give them even more incentive to want to save.

Making the process of saving can be a positive activity for kids if you inject a bit of creativity and fun while you’re helping them learn about the importance of this money habit.

Teach Your Kids How to Donate

Teaching your children the value of giving to others can impart more than just a good money habit, it can instill a sense of pride and a sense of responsibility to the community that is equally important in teaching your children about financial literacy.

You can create a bank account for your child that is designated for their donations or their “giving” account. Then you can sit down with your children and help them plan which organizations or causes they would like to donate to. You can find charities in your area that your children can be a part of where they actually see, feel and experience the good that their donations are making for those people in need.

This is a great teaching moment that can benefit children beyond just sending a check in the mail to an organization. Having your children meet the people that they are helping can reinforce the good that they are creating in their communities and will likely help them to foster good donating and giving habits for the rest of their lives.

Teaching Kids How to Invest

Once your children have a good grip on basic money skills and habits, the next step would likely be to introduce them to the wonderful world of investing.

If they are old enough to understand, explain how compound interest works. This can help them begin to learn how money grows as you invest.

Next, you can begin to teach them about the basics of investing and what a stock is. You could show them your investment portfolio so that they understand how the compound interest worked in increasing your portfolio over the years.

You could also talk with them about diversification and the need to avoid having all of your “eggs in one basket”. You can discuss how important diversifying into real estate is and why the wealthiest people in the world own real estate in their portfolios.

This is an opportunity for you to tell them about the various ways they can begin to look at investing in real estate when the time is right. You can explain to them your experience of doubling your money in 5, 6, or 7 years by investing in commercial real estate syndications.

You can deliver that lightbulb moment where they learn about how passive income from investments such as real estate syndications can allow them to have the luxury of deciding if they want to work or not.

Just imagine how much more enlightened they will be around subjects of money and investing just by being exposed to all of the concepts early on. These financial lessons can be one of the greatest gifts you give to your children.

Final Money Teaching Tips for Kids

Money shouldn’t be a taboo subject with your children. It’s a good idea to make these teaching exercises fun and interactive as you teach them these life-long lessons. Start early and often when talking to your kids about their financial education.

Here are some tips to get you started:

• Take everyday situations: and use them to create teaching moments. Go over the household bills, have money conversations, and then ask them how the family could reduce next month’s bills. Let them participate so that they can feel like they have ownership with you on problem-solving.
• Utilize technology: kids love using apps and there are some wonderful apps out there that are helping kids increase their financial literacy at any age.
• Make it fun: Turn a trip to the bank or grocery store into a fun game for the kids to learn more about finances. Let them help you in making decisions and then create teaching moments around those decisions. Find different ways to play games like money games – a board game like monopoly for kids, for example – with the entire family to make it fun for everyone.
• Open a savings and/or checking account for your child: Most banks will allow you to open a savings or a checking account for your children. When kids see their money grow – on paper – through their own efforts it can help them build confidence around money and it will help them to want to continue learning about financial literacy.

The Bottom Line

The most important thing to remember is that your child is exposed to financial education and tools and conversations around money knowledge that will help them gain experience with various financial issues. Giving kids and older children these consistent financial literacy lessons and then allowing them to have ownership of their decisions will help them create good money habits throughout their lives to help them thrive in the real world.

Until next time, Earn Passively & Live Abundantly!

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