As parents, it's important to start teaching our children about financial literacy at an early age. Financial literacy is the ability to understand and manage money, and it's a valuable skill that will serve children well throughout their lives. But, when is the right time to start talking to our kids about money?
Experts recommend starting to teach children about money as early as age 3 or 4. At this age, children can begin to understand basic concepts like counting and saving money. As they get older, parents can start teaching them more advanced concepts like budgeting and making smart financial decisions.
One way to start teaching financial literacy to young children is by giving them an allowance. This can be a small sum of money given to them on a regular basis, such as once a week or once a month. Children can learn about earning money, saving money, and spending money by managing their allowance. Parents can help them set goals, such as saving up for a toy or saving for a family vacation.
Another way to teach financial literacy is by using real-life examples and situations. Parents can use everyday experiences like grocery shopping or going out to eat to teach children about budgeting and spending money wisely. For example, when a child wants to buy a toy at the store, parents can explain how much the toy costs, how much money they have, and how much money they will have left over after buying the toy.
By the teen years, parents can start discussing more complex financial concepts like credit and investing. It's important to explain the risks and benefits of these concepts in a way that teens can understand. There are definitely certain conversations you want to have before a teen heads off to college, as college campuses can be home to predatory credit card companies looking to sign up new adults who might not know what’s best in that situation. Budgeting is also an important one for teens - involve them in the conversation around budgeting for things like groceries, show them how to shop for sales and check flyers, and how to lay out and stick to a monthly budget.
By using real-life examples and situations, setting goals, and discussing more complex concepts as children grow older, parents can help their children develop a strong foundation in financial literacy that will serve them well throughout their lives.