Early financial education is crucial; in fact, some, including a blog post published on DaveRamsey.com argues that these fundamentals are necessary, as this knowledge will help children to one day manage their finances, balances, and budgets once they’ve graduated from college and look to take care of their own personal finances. Financial literacy, which an ability to understand how money functions in the world, is considered necessary for personal success. Teaching young people about how someone earns money or makes money, as well as how one manages money, invests money, or event donates money positions them for a distinct pathway to financial freedom.
Money Management International published a post about teaching children financial lessons through fundraisers. This is an incredible idea because 70 percent of U.S. children are asked to participate in fundraisers on behalf of their community, organization, or school. This opportunity allows most parents to teach their growing children basic math skills as well as financial responsibility. Also, fundraisers help children to basic business skills, goal setting, charitable giving, and budgeting.
The proposition of a fundraiser begins as a noble initiative but becomes so much more when it offers children a tiered system by which they can earn prizes and trinkets after they’ve set realistic goals and earned money for a project using only the resources made available to them.
Counting change, organizing receipts and demonstrating responsibility conditions them to be suited for entrepreneurship. However, fundraisers aren’t the only way to direct children to grow their financial knowledge. There are numerous ways to help children get an early start on money management:
For younger lots, such as those in elementary and kindergarten, ‘simple’ tends work be best.
- Lead by example: Be mindful that your children are looking to your habits to learn about expenditure. Your children notice your conversations and bouts about frivolousness and frugality. Practice healthy habits. Also, rather than paying with your credit card each time you visit the mall or grocery store, use physical cash and count the money out, so your child gains a better understanding of what a $10 bill can purchase them and how much change is due.
- Mason jars over piggy banks: Rather than storing change in the piggy bank, help your child to store his or her money in a transparent jar so that they’re offered a visual image of financial accumulation. They’re likely to develop pride around watching their personal wealth mature. Encouraging them to count the money often and view it as a reserve, rather than something to be spent, is an important way to push him to see the long effects of long-term saving.
- Money doesn’t grow on trees: Prior to any adventure involving the spending of money, share your budget with your child and educate them on how much everything costs. Also, when shopping, allow them a bill or two from their personal saving jar and allow them to understand what they can or can’t afford with the money they have on hand.
Teenagers and adolescents have increased awareness/understanding of money, as many of them have jobs or they receive an allowance, however, many still forget that money isn’t a magical object that merely appears, so continue to teach them in ways that are diverse, yet simple.
- Weighing decisions; Teach your child about the importance of financial choices. By demonstrating opportunity costs, they learn that if they choose to spend money a game console, they won’t have the money to purchase a new mp3 player.
- Philanthropy and charitable giving: Young people should recognize the importance of giving as early as possible because it instills the importance of community, and they giving has an intrinsic effect. While some give money to charities or churches, others choose to fundraise, volunteer or donate goods.
- Earning allowance: Kids shouldn’t merely be given a stipend for floating around their home, children should earn their allowances through chores and housework, so that understand the process by which employment and occupation function. Consider giving them a slight raise when they’ve proven that they’re committed to their tasks, and consider decreases when they’ve demonstrated that they’re not interested in earning.
- Banking account: While checking accounts come much later, it’s never too early to get a child a banking account, which would not only equip them with responsibility but teach them that money management is more than personal but institutional. Also, they’ll learn about interest and percentages, and learn that they’ll earn more interest through saving more.
- Credit card dangers: Credit cards are going to piped right into your child’s hands as soon as he or she turns 18, so it’s important for you to communicate that your credit and financial existence can be horrifically wreaked by making poor credit card choices early.
- Employment: The best way to teach financial responsibility is enable your child to understand the value of earning their own money. Help your child scan the papers and ask friends so that your child get comfortable with the prospect of earning money during school breaks or even after school. This will acquaint your child with notions of esteem, leadership, and importance.
To put it simply have to prepare yourself to talk to you children about money and equip your child with the tools to succeed financially. Being honest, setting family goals, and discussing value may put your child on the path to becoming a leader in the financial industry or a developer of educational fintech applications that may make it easier of future generations to access and utilize personal wealth.
Ajay Nagpal, the Chief Operating Officer at investment management firm Millennium. Ajay Nagpal supports social entrepreneurship through his work as a Board member of Echoing Green. Please visit his social entrepreneurship blog to learn more about that! Also, find him on Behance!