Sometimes, parents are reluctant to talk to their children about “financial matters”. That’s unfortunate. For one, if they aren’t talking about it, they may not have a handle on their own affairs.
But even children of savvy savers need to learn the importance of responsible spending. Else, they will learn the hard way that luck favors very few when it comes to riches and ads that encourage you to buy into the ‘buy, buy’ culture are to be avoided.
Some headway is being made in getting schools to recognize financial literacy as a core life skill, but progress is slow. In the meantime, independent initiatives such as My Finance Coach, a non-profit organization that aims to improve financial literacy among 10- to 16-year olds, are helping to fill the gap.
Even so, financial illiteracy among children is an epidemic. An OECD Pisa study found that only 15 percent of 15-year-olds in the participating OECD countries were able to make simple decisions about everyday spending.
Here are some easy tips for parents to get their kids on the right track to a prosperous future.
3- TO 5-YEAR OLDS
Once children leave the terrible twos and enter preschool, they have – hopefully – learned a little bit about delaying gratification. That’s a good time to begin teaching them about money. Children this age are able to understand that they may have to save up for something before they can buy it. Lessons like having two piggy banks, one labelled “spending” and one “savings”, can create visual and physical boundaries.
6- TO 10-YEAR OLDS
As they enter school, children should become part of the family financial responsibility plan. Discuss purchases with them. Let them into decision making. For instance, is it worth 50 cents more a jar to buy a name-brand applesauce that tastes just as good as a less-expensive generic one? The important lesson for them to learn during this time is that money is finite. As a limited commodity, they have to decide what is important and find ways to get more bang for their buck.
11- TO 13-YEAR OLDS
Teaching children about anything gets tricky once they enter the teenage years. Move away from piggy banks to digital apps. FamZoo, for instance, is an online, virtual family bank. Funds are managed by the banker (parent) in IOU accounts or prepaid cards. Parameters are almost limitless. Parents can set up automated allowances, offer rewards for doing odd jobs, set up “payroll” withholding to be used for saving, set up budgets and more. Maneuvering through the apps such as FamZoo will prepare teenagers for managing savings accounts, balancing a checkbook and creating a personal budget later on.
Last, but certainly not least, be a good example. Your children are watching your every move – and purchase.