*Your child may have inherited your eyes or your smile, but unfortunately, being financially literate cannot be passed down genetically. For your son and daughter to be able to make intelligent, informed money decisions, you need to teach them how. To assist you in tackling the task of instructing your kids about finances, here are a few commonly used tools and techniques that can generate genuine financial interest and make learning fun, interactive and relevant.
Get creative with allowances
Most parents use allowances as a means of introducing their children to the concept of money management, but Steve Schaffer, the CEO of Offers.com and parent of three, feels that parents are missing out on several unique instructional opportunities with allowances. Shaffer and his wife designed an allowance system for their kids in which each child receives a weekly payment of $5 in addition to 50 cents for each year of age. This means that a 12-year-old receives $5 plus an age adjustment of $6, for a total of $11 each week. From each “paycheck,” 15 percent is placed in a savings account, 25 percent is deducted for “family tax” and 10 percent is reserved for charity. The benefits of such a system include practicing addition and subtraction, working with fractions and percentages and recognizing the importance of being kind and generous.
Many U.S. banks and financial institutions are already on board with beginning finance education at an early age and have implemented online tools for children. A game such as The Great Piggy Bank Adventure, a collection of financial lessons hosted by a friendly gabbing piggy bank, is a great tool for allowing kids to practice their skills.
Allow children to learn from mistakes
Let’s say your child wants to spend his or her money on a toy that you know is junk and likely to break within 24 hours or your child wants to buy a toy that you know will be played with once and then forgotten. Go ahead and allow the purchase, letting your child waste money and learn from a bad spending decision. It’s likely you won’t even have to point out that your child should not have spent money on something of poor quality or on a fleeting whim.
The lessons to be derived from such a practice include shopping for high-quality products, avoiding impulse buying and feeling the pain of buyer’s remorse. Better for them to learn now than to learn years from now on a significantly more expensive purchase.
Be future oriented
No aspect of modern life has escaped the far reach of technology; finances are no exception. The world today is trending toward complete digitization of all currency, and economists currently estimate that only 8 percent of all the world’s currency is physical cash.
There are more methods than ever, so acquainting your children with this evolving trend is a good idea. Many of the digital payment methods are conducted via smartphone. By gaining a familiarity with managing, spending and saving money using a smartphone — preferably a phone compatible with Android Pay and Samsung Pay such as the Samsung Galaxy S7 — your young learner will be better prepared to handle the marriage of money and technology in the years to come. Heck, they probably already know more about your smartphone than you do.
If you think your children are too young to deal with money and finance on their own, or if you believe they will learn these skills in school, you may be wrong. Considering the lack of financial literacy in college students, the earlier you begin teaching your kids about money and finance, the better off they will be.