When it comes to finances, we always think that that is for adults and as parents, we tend to push this behind and focus more on academics when kids are young rather than on finances.
Teaching kids about finances is not as easy as 123 and at times can be overwhelming. So how do we teach our kids about finances in a simple way?
Let’s explore the 5 steps of simple finance for kids.
Step 1: Real life experiences
It is common for parents to teach a little finance to their kids when they start receiving pocket money. In actual fact, we should expose them to finances on day-to-day life experiences. It doesn’t necessarily have to be about numbers. It can be a lesson of what is a want and what is a need.
Step 2: Get involved
Get them involved. Whenever we are making decisions in regards to finance. As simple as deciding whether to buy a pair of shoes, we get our kids involved by getting them involved to help make the decision and why they come to the conclusion.
Step 3: Visualise
Help the child to visualize how proper finance planning can affect their life. Give them a piggy bank and let them watch how their money grows if they do not spend it. If they do spend it and ask them how having lesser money in the piggy bank feels.
Step 4: Appreciation
This is pretty similar to the previous step but with a goal set for reaching a certain amount of savings and what to do with it. When we start giving them pocket money, we tend to nag at them to save up.
Teach them the purpose and how it can affect their lives. Most importantly, it teaches them that money doesn’t come easy and that we need to work for it.
Step 5: Responsibilities
Teaching finances at a young age teaches them kids responsibility. It teaches them to spend within their means and to save up for things that they need.
As they grow older, we can introduce more concepts to them, such as interest rates and inflation. One good example is to open a bank account and guide them along on how to manage their finances at a bank.
Teaching and explaining finances to a child doesn’t have to be overwhelming or stressful. In fact, financial literacy allows them to think critically and gives them the ability to make better decisions in the future when they enter the adult world.
As they’re starting to explore the world of finance, they may make mistakes along the way and these are great teachable moments where they’ll learn and beware of what NOT to do in the future and how to make better decisions.