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Have you ever heard the proverb “ the early bird catches the worm”? It applies in many areas of life, be it work or home, helping you stay ahead of the game. This is, after all, one of the reasons parents enroll their children in coaching institutions and enrichment classes – to ensure they acquire skills to help them build a successful life. However, beyond sports and academics, it’s also important to teach kids financial literacy because no matter what their professions will be, they will always deal with money during their lives – and it’s better to know how to make it work for them. Research shows that by the age of 7, kids generally know the value of money and understand that the decisions they make can either cause problems or benefit them in the future.

Given that money plays a massive role in life, affecting everything from your well-being to your relationships with others, teaching kids about it equips them with the knowledge, skills, and confidence that allows them to manage money efficiently. It’s not just about answering common questions about money but also about teaching them concepts such as investing, which is an excellent way to build long-term wealth. There are many investment options, with some of them being riskier than others. For instance, now there are a lot of people interested in the current bitcoin price, but cryptocurrencies, although they offer substantial returns, have a volatile nature, and investing in them requires thorough research and a smart strategy. It’s important to teach kids how to make the right choices regarding their money, which also applies to investing. In this blog, we will explore how you can teach your child financial literacy, so read on to find out more!

Teach Them To Be Mindful Of Their Spendings

One of the most important things to teach your child is to pay attention to how they spend their money. You can probably recall when your child watched a commercial and decided they wanted a unicorn Huggle Pet or walked through a grocery aisle and asked for those Trolls-themed jellybeans. It’s easy for children to react to spending triggers – after all, don’t adults have spending impulses, too? This is why it’s important to let your child know why they may feel like purchasing something and teach them to pause before they do it.

Also, you should discuss the difference between needs and wants and how being aware of these differences can help them be smarter about their spending.

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Once you do this, let them make their own decision, whether it’s a good or a bad one—after all, part of making them financially responsible is letting them see the consequences of their actions.

Encourage Them To Save

As your child learns about earning money, they will understand the value of various things in life, as well as the importance of savings. If you haven’t yet brought a piggy bank home for your child, now is the best time to do so, encouraging them to slide their coins in there. If you have an older child, this is a great opportunity to open a bank account in which they can save their earnings and also multiply their savings.

It may seem pointless to tell a kid to save money without explaining to them the reasons why they should do it. So, consider helping them define a goal for saving, as this is more likely to motivate them. If they know what they need savings for, you can help them break down their goals into smaller ones. For example, let’s say your child wants to purchase a $50 video game, and they receive a $10 allowance weekly. In this case, you can help them determine the timeline for reaching that goal.

Discuss Debt

Among all generations, GenZ has the lowest average credit card debt, and while this is great news, it is because this generation has witnessed their parents in debt because of the recession. With the following generation, digital cash can make things intangible, with no money to actually part ways from. That’s why you should teach your child about debt and how it works, as well as the impact of taking too much of it.

Do you have any personal stories to this end? If so, don’t hesitate to share them with your child because it will definitely be helpful! Also, make sure to monitor their spending habits – this is important, especially if they have their own credit card or use yours. Teaching your child not to bite off more than they chew is a very important aspect of financial education, so don’t overlook it.

Talk About Investing

Kids are smart, and they tend to learn quite fast. Even if your financial literacy may have begun later, that doesn’t mean it should be the same for your child. Besides savings and debt, it’s also imperative to teach them about the different investment avenues, such as opening a fixed or recurring deposit to multiply money.

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But of course, you can also introduce your child to more complex investments such as bonds, stocks, and even cryptocurrencies. Don’t forget to also teach them about the potential risks of each investment and the steps they must take to decide which asset class is best for them. It would be a good idea to let them conduct their own research instead of doing it yourself (obviously, depending on their age) and then let them come back with as many questions as possible so you can guide them.

Set An Example

If you want your child to take financial literacy seriously, it’s essential to be a role model for them to this end. Children learn from adults’ behavior, so if you want them to manage their money effectively, there’s no better way to do so than by showing them how to do that! If you’re saving, tell your child about it and the reason why you’re doing it. Consider creating a joint savings account for a home appliance or a new TV, as this will allow them to make a tangible contribution.

Obviously, you need to be mindful of your spending, too (after all, it’s what you’ve taught your child, right?) and not buy something impulsively. It’s also a good idea to provide context when making a specific choice – for instance, when purchasing a certain brand of toothpaste over another. Remember: being open to talk about money is key when it comes to helping them become financially literate.

Takeaway

Teaching your child about money may not be the easiest thing to do, but remember that it’s your responsibility to do it. In the end, it will be worth the effort, as it will help ensure your child becomes an adult who thrives financially.