Parents take on many responsibilities when it comes to their children. Not only do parents need to teach children how to walk and talk, but how to someday be responsible, healthy adults as well. A big part of growing up to becoming a healthy adult is learning healthy money habits and financial literacy.
The first step to teaching kids about finance is teaching them the basics of finance itself. You can't teach someone how to budget if they don't first know what a budget is. Start with teaching your children some basic financial vocabulary like the following words:
Asset: An asset is anything you own that has monetary value like your house, car, or jewelry.
Account: There are many types of financial accounts your child will need to be aware of like a checking account that stores your money at the bank, a savings account that stores the money you want to put aside and save at the bank, and a brokerage account that helps you store and manage your investments.
Budget: A budget is a financial plan that dictates how you will spend your money.
Debt: Debt is a financial obligation that you owe a person, company, or lender.
Interest: Interest is the rate or fee that a borrower has to pay alongside their loan repayments.
Investment: An investment is when you put money into something with the hopes of gaining a greater profit later.
Stock: A stock can also be known as a share. Stocks are something you can buy in order to have a portion of ownership in a company. That portion of ownership can then pay you more money later as the business does well.
Tax: A tax is a portion of money paid to the government. We pay taxes through our paychecks and when we make certain purchases. Each year taxpayers file taxes to make sure they are caught up on all the taxes they owe.
It's a good idea to start teaching children about finance and money at an early age. But these monetary teachings might look different depending on what age your child is. For example, a toddler is going to be ready for certain teachings like, what is money? but not, necessarily things like, what are stocks?
Finance for kids in elementary school is going to involve more basic lessons about money. This will help them build the foundation of knowledge they'll need to learn more complicated money lessons in the future.
Teach them the basics of what money is and what it can do. Talk about how money can be earned, spent, and saved while you teach them things like how to count.
Step 1: Teach them what money is by showing them dollars and cents.
Step 2: Teach them how to count different types of dollars and cents.
Once your kids are a bit older, you can start teaching them good money habits. They might even be old enough now to start dealing with real money of their own.
Teach them how to earn money, how to spend money, and how to save money. Help them learn how to set goals like a savings goal for a new bike they want. Mentor them as they earn rewards through chores and save their pocket money in their piggy banks for the things they want.
If you want to give your young teenagers a safe way to start using their hard-earned money, take out a prepaid debit card. This will allow kids to safely store their money in a secure location and easily use their money almost anywhere on a reloadable debit card.
Step 1: Set up a simple way for them to start earning their own pocket money or allowance.
Step 2: Help them set up a way to store and save that pocket change.
Step 3: Help them learn to make responsible plans for how to save and use their money wisely.
Older kids need to learn a lot more about money than younger kids do. Teenagers and high schoolers need to start preparing to live on their own one day. As a parent, you can help raise them for success and financial responsibility by teaching them about finance now.
Teach your older kids how to budget and how to manage their finances for the short-term and the long-term. If you haven't already done this, help your teenager set up their own checking account and savings account. Then teach them all about how to use things like their new virtual piggy bank and debit card responsibly.
Step 1: Set up a checking account and a savings account.
Step 2: Teach them how to budget for immediate wants and needs.
Step 3: Teach them how to budget and save for their long-term goals.
Step 4: Teach them about investments and help them get started with things like stocks, mutual funds, and retirement funds.
Create a simple lesson plan about budgeting for kids to go over the basic parts every budget needs:
Step 1: Calculate your income by figuring out how much money you have coming in each month.
Step 2: Calculate how much money you need to spend each month on necessities and subtract this amount from your total income.
Step 3: Calculate how much money you want to spend on nonessentials and luxury items and subtract this amount from your total income left after step 2.
Step 4: The key to a balanced budget is simple. Make sure that the calculations from steps 2 and 3 don't leave you with a negative balance in your account. This is how you avoid living paycheck to paycheck and keep enough money leftover for emergency expenses and savings.
There are many mobile money apps out there like investment apps, budgeting apps, and money transfer apps, but did you know there are mobile apps for kids and their finances too? Always do your due diligence in researching which apps are the safest for your kids and their finances, but here are a few example money apps for kids you can look into:
Don't wait until your kid starts earning money to have the money talk. Start to teach them healthy and smart financial tips, tricks, and habits as soon as possible so that being a financial pro becomes second nature to them.
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