When I was a youngster, my grandma taught me how to write a check and how to balance a check book. I didn’t realize it at the time, but that simple lesson snowballed into something bigger which helped navigate financial decisions in my adulthood.
Including our children (or grandchildren, nieces/nephews, etc.) in financial discussions and decision making has a powerful effect. It is real-world, hands-on experience and not an abstract lesson they are just reading in a textbook. Here are a few things we can teach our kids now to start their foundation of financial literacy:
1. The value of money – seems basic, right? How often do our kiddos ask for the biggest or most expensive option because they know we are paying? Understanding the amount of time and effort to make that money is crucial. A weekly chore allowance is helpful for building a sense of responsibility and perspective for the things they want to buy. Breaking down the amount of work and the number of hours it takes to earn that money may change spending habits.
2. Compounding interest – saving and investing is a powerful tool that goes hand in hand with accomplishing so many life goals. Setting aside a percentage of weekly allowance will paint the picture of accumulation. Then, add “investing” in the mix with a high yield savings account. Or they can pretend play in the stock market and keep track of the growth that is happening in addition to the savings.
3. Understanding the why – financial matters include thought and discussion, whether they be the basic daily ones, or periodic bigger ones – use those moments as a teaching opportunity. We should explain the concepts, process, pros/cons, and resolution from anything from opening a credit card or refinancing a mortgage to balancing monthly bill paying – all this can help mold the financial big picture.
Ashley Costello CFP®