Financial literacy for kids is a very important aspect in their lives today. It seeks to provide the knowledge and skills to help the child make effective and informed choices through his or her basic understanding of finances. For most of the growing kids today, money to them is meant to buy things.
In many economies, teaching a child about money is an alien concept during elementary school and high schools. This has actually led to some serious consequences. By instilling this concept in the minds of kids, you build up a lifetime of prosperity and financial responsibility.
Despite the current foreclosure crisis that seems to be the topic of virtually every newspaper these days, the need for personal financial education (financial literacy) is not a new concept. Indeed, the fact that the U.S. savings rate is at an all-time low, while the personal debt rate is at an all-time high, demonstrates just how important financial education is to our future (and the future of our kids). A large number of parents are hoping to be able to either leave their children with a legacy or to at least be able to provide them with the means with which they can obtain the tools to help them along in life. But the ultra-consumptive mindset of many in our generation has led to bad financial decisions in which there was often times no thought of a “rainy day” much less tomorrow.
For many, it is now raining, and raining hard. That’s not really the unfortunate part. because rainy days are always ahead of us. What is unfortunate is that the same reason that some people are in the crisis that they are finding themselves in is the same one that got them there in the first place.
The simple concept is the earlier a child starts his or her savings habit; the greater will be their return. Here are 5 top tips to improve financial literacy and encourage your child to start saving.
1. Lead by Example – Remember your children look up to you, you can lay an example by having a jar or money box where you deposit your spare change. Children learn more by what you do than what you say. By wanting to follow your example your job is half done.
2. Add interest – when your child is old enough to understand the concept of interest you can act like a bank and top up their savings. Keep the numbers simple by adding 1 coin for every 5 or 10 they save. It’s a good opportunity to introduce some simple yet important money lessons.
3. Open an account – Another simple concept is to take your child to the bank and open a savings account. Then make an event of going and making a deposit.
4. Save for a purpose – Sometimes you shouldn’t be getting all your children needs for them. Encourage your child to save for a holiday, a particular toy or something they value.
5. Consistency – For saving to become a habit it must be done regularly and often. If you give an allowance encourage your child to immediately put some money away. If they get extra for chores or birthdays encourage them to allocate a percentage to saving.
In all the above examples it should be emphasised that for the money saving habit to stick it must be enjoyable and rewarding. Financial literacy for kids can be taught in schools, at home or even via the internet. Today we have online programs and webinars that can actually teach kids how to manage their finances from the comfort of their home. Such programs prepare kids for a brighter and financially secure future.