Financial literacy is an essential life skill that should be taught to children from an early age. It is never too early to teach children the basic financial concepts that put them on the path to financial success. Here are the basics of finance that every child under the age of 13 should know:
Preschool and kindergarten children
Some basic concepts
If your children are in preschool or kindergarten age, you can introduce them to some basic concepts. Consider showing your child a dollar bill and discuss with them what it could be used for. Try to give them the idea that dollars have value and can be used for the things they need or want.
You can also start introducing the different types of money, such as banknotes and coins. Insist that coins and banknotes have value and can be used to buy the things you want.
You can also talk to your children about who has money and why people need money. One idea would be to introduce the idea of trade, and then talk about how money has replaced the need to trade for things.
Saving
Saving is an essential part of financial management. Teach your child to save money for a specific goal, such as buying a toy or a rainy day. A good way to do this is to give them a clear piggy bank. The advantage of a well-organized piggy bank is that your child can see their progress. Tell them about your savings and make a big deal about increasing savings.
Give an example
From an early age, their children watch them to see how they handle money. According to a study conducted by researchers from the University of Cambridge, financial habits are formed at the age of 7 years. So if you don’t have a budget or if you don’t make a good decision yourself, your children will adopt the same behavior.
This will help you get into the habit of saving and managing your money better.
Elementary and middle school students
Basic Mathematics
Basic math skills are essential for financial management. Teach your child simple arithmetic like addition, subtraction, multiplication and division. This will help you understand the concepts of budgeting and saving and familiarize yourself with financial calculations.
The first and most important concept taught to children is money management. Children need to understand the basics of budgeting, saving and spending. Teach your child how important it is to put money aside to save and spend wisely.
Earn money
Teach your child that money is earned through hard work. Explain that you earn money through your work and that this way you can afford to buy the things you need. Introduce them to the concept of entrepreneurship and help them start a small business such as selling lemonade or homemade crafts.
You can also teach them how to earn money by paying them for household chores.
Delayed Gratification
Children need to learn the concept of delayed gratification, which means postponing something they want now for something better in the future. Explain to your child that it is important to save money for more important goals rather than spending it all on small things that he wants now. This will help you develop your patience and avoid impulse purchases.
Needs Vs. Will
Children must learn the difference between needs and desires. Explain to them that needs are things they need to survive, such as food, clothing, and shelter. Desires, on the other hand, are things that you want but without which you can live, such as toys or sweets. It would also be a good time to introduce the idea of opportunity cost. Explain to your children that if you spend money on one thing, you may not have it for other things. Help them evaluate decisions and their potential outcomes.
So basically, teaching your child basic financial concepts is an essential part of parenting. By teaching them money management, needs versus wants, saving, earning, delayed gratification, and basic math skills, you can help your child develop healthy financial habits that will last a lifetime. Start early and make learning about finances a fun and interactive experience for your child.