Looking for tips on how to teach financial literacy for kids?
How much better off would you be right now if you’d been taught the basics of personal finance as a kid?
Would you have more cash saved up right now? Would you be financially independent already?
I’m sure all of us would be better off financially and we would have been able to avoid making certain mistakes (or at the very least, we would have made fewer mistakes).
You would have started investing earlier in your life, and generally speaking, you would know more today because of the head start you got as a kid.
Of course, nobody expects a kid to know everything about personal finance but by learning the basics at a young age they are more likely to be better with money.
Let’s get straight into how to teach financial literacy for kids…
- Spend Less Than You Earn
- Invest The Difference
- Teach Your Kids To Avoid Debt
- Split Money Allowance Into Categories
- Involve Your Kids In Purchases
- Read Personal Finance Books Together
- Play Financial Literacy Games
- Create Opportunities To Make Money
- Show Your Kids The Importance Of Giving
- Model Good Financial Habits
Spend Less Than You Earn
As a parent, one of the most important topics you should teach your kids is the importance of saving money.
This really comes down to one simple tip, spend less than you earn!
Now, most kids don’t have a means of income other than their allowance and they don’t have any expenses so this lesson might be hard to teach.
They definitely won’t understand the concept of saving money but you will have to do your best to get them into the saving mindset.
A great way to do this is to have your kid put away a certain percentage of their allowance when they receive it.
For example, you can tell your kids that they have to save 25% of their allowance for a toy or other item that they want later on in the near future.
Or, you can encourage saving by matching the amount of money they have saved so they can save even more.
The goal is to establish the mindset early that saving money is a good thing and it’s something that should be done and will have benefits…
By getting into this habit as a kid, it will be easy to maintain as your child transitions into a teenager and an adult.
If you are looking for an easy way to get your kids in the saving mindset, I recommend checking out Greenlight which is a bank account for kids to learn about managing money.
I highly recommend checking out Greenlight!
Invest The Difference
After you teach your kids about the importance of saving money you should teach them how to invest their money to make even more money.
Investing is the path to becoming wealthy so this is one of the most important financial literacy topics for kids!
One way you can teach your kids how to invest is by doing it for them, you can teach them the basics of how investing in stocks work and then invest some money for them.
The better way to do this is to use Greenlight, which is the bank account app we mentioned before but it also lets kids invest if you choose to do so.
Greenlight has an investing plan for kids where you can deposit money into the investment account and your kids can then use only the money in the investing account to invest in stocks.
I know this sounds like you are giving too much responsibility to your kids but you don’t need to worry at all because as the parent, you will have to approve every trade.
So… no, your kids can’t just invest all their money in meme stocks!
Plus, with Greenlight your kids will have access to educational content and tools to make investing easy to understand.
I highly recommend checking out Greenlight to teach your kids how to invest!
Teach Your Kids To Avoid Debt
If you want to teach financial literacy for kids then one of the most important topics to teach your kids is to avoid debt.
Now, I know that there are times in life where you will need to take on debt like student loans or a mortgage.
But… the lesson here is to teach your kids that debt should be avoided unless absolutely necessary or for a really good cause.
You should also teach your kids how to manage debt if they need to take out loans for whatever reason.
It’s important to teach your kids about the importance of credit but they do need to know how to properly manage debt to not make drastic mistakes that can haunt them for a long time.
It can be really tough to teach a kid about debt since they really don’t understand money as yet so you’ll have to get creative.
One way to teach your kids about debt is that if your kid wants to buy something but doesn’t have the funds to do so you can lend them money that will have to be paid back to you with interest.
It can be pretty cruel to do this to your child and they definitely won’t understand it but it will teach them a very valuable lesson!
Split Money Allowance Into Categories
A great way to pass down financial literacy to your kids and teach them about the value of money is to split their allowance into categories.
We already went over savings and investing so one thing you can do as a parent is to put your kids’ allowance into separate “buckets”.
For example, let’s say you give your kids $20 a week in allowance, you can put $10 into savings, $5 for investing, and $5 for spending.
This will teach your kid how to properly use their money for different purposes!
Now, you can do this with cash but you will either have to trust your kid not to move money around or you can hold the money for your kid.
The better way to do this is to use Greenlight’s bank account for kids.
With Greenlight, you can deposit money into different categories such as the ones we discussed earlier and have full control of your child’s account.
Involve Your Kids In Purchases
A great way to teach your kids about personal finance is to simply involve them more in your purchases.
They won’t fully understand the value of money and what it’s like to work for money but it will help them get there.
A great way to make them understand is to use the time value of money, meaning you should tell them how many hours you will need to work to afford the item.
This will help them to get into the mindset of “time is money” and this will drastically help them make smarter financial decisions when they get a job.
Read Personal Finance Books Together
As a parent, you are doing your best to raise your kids to be the best they can be but sometimes you might run out of ideas or your children might not listen to you.
Whatever the case might be, it’s not a bad idea to get a little help.
You can purchase personal finance books for kids to read to your children and have them learn this way.
There are many personal finance books that are great for kids that make money easy to understand and sometimes even fun!
If want to check out some awesome books then I recommend taking a look at my list of the best personal finance books for kids here.
Play Financial Literacy Games
Going off of the topic above, another great way to teach your kids about personal finance is to play games about money with your kids.
We all know the classic game Monopoly which is a great game to teach your kids about money, investing, and taxes.
There are also other personal finance games like Money Bags, Managing My Allowance, Cashflow, etc… that can all be found on Amazon.
These games make learning personal finance fun and it’s a great way to start teaching financial literacy for kids!
Create Opportunities To Make Money
Another great way to teach your kids about the value of money is to give them opportunities to make more money other than their allowance.
For example, you can have your kids help you out with some DIY projects around the house and give them some money for their help.
This will teach your kids that money has to be worked for and it doesn’t come easy!
By having your kids work for money they will learn to appreciate the value of money and hopefully, this will lead to them managing their money properly in the future.
Show Your Kids The Importance Of Giving
We talked about many topics on financial literacy for kids to teach them the importance of money but you don’t want them to think that money is the most important ever.
I mean, you don’t want your kids’ lives to be revolved around money. Yes, you want them to be smart when it comes to money but you don’t want them to think that all they need in life is money.
The way to do this is to show them the importance of giving back to those in need.
Giving back is one of the best ways to use your money and you can have a major impact on someone’s life who is going through a hard time and your kids will learn this.
The point of this tip is just to teach your kids that money isn’t the most important thing in life!
Model Good Financial Habits
Last but not least, one of the best ways to teach financial literacy for kids is to do not say.
What I mean is that kids learn mostly from actions, not what you say to them so if you have bad financial habits then your kids will most likely pick them up.
So, you simply will have to practice what you teach!
Developing good financial habits will not only help you improve your financial life but it will also be passed down to your children because kids learn from what their parents do.
These are the 10 best methods you can use to teach financial literacy to your children!
Personal finance is a very important topic and we usually figure this out as we enter our adult years but the earlier you learn about personal finance the better it is.
I highly recommend using these methods to teach financial literacy to your kids and while they won’t grasp everything you teach them, they will absorb a lot of information that will set them up for success in the future!
If you liked this post then I recommend checking out my posts on 16 Best Money Books For Kids To Learn Personal Finance and 9 Financial Literacy Topics You Need To Learn About!
What do you think about these methods on financial literacy for kids? Are you teaching your kids about personal finance? Let me know in the comments below!