There is a growing realization that America’s youth are not prepared to make complex, or even some daily financial decisions. And in a world where private sector pensions are becoming rare, being financially literate, understanding the role of money, and being able to save for eventual retirement is becoming increasingly important. Fortunately, some colleges are beginning to focus on this area, but reaching a wider, younger audience will be more beneficial.
Many people don’t feel qualified to educate about financial topics, but in reality, just about anyone can engage in some basic and fun steps that can help a young person get a smart financial foundation. And just because your child may only be in middle or even elementary school, doesn’t mean it’s too early to start showing them the value of money and how to manage it.
Here are six easy tips to help your pre-teen understand how money is earned and some ideas on how to manage it.
Include them in conversations.
Just as you explain to your children why they (have to) go to school, you can explain to them, for example, why you go to work. Get them to understand that you have to earn money in order to have money to spend. This way they may gain an appreciation for what you do for them and why there may, at times, be limitations on what you choose to spend on them.
Take your child to the bank.
Children soak up information and it might be surprising how much about business they will actually absorb. Explain, for example, what a bank account is and how the bank pays you interest and makes money at the same time. It might be fun to take them with you to the bank to conduct a transaction. Yes, you can also show them online, but it might be an easier visual if you visit an old-fashioned brick and mortar branch.
Pay them for routine chores.
I understand that some families have opposition to paying their kids for helping around the house. At the same time, if the child has money in their own pocket to spend, they can learn about choices and responsibility. If, for example, your child has earned $20 and wants to buy a new iPhone, that is a great opportunity to show them how expensive things are and the importance of working and saving.
Let them pay at the checkout line.
Children often enjoy shopping, especially if it is for clothes or fun things for their hobbies. When they are shopping, have them look at price tags to compare their choices. And ask them to total the amount of their purchases which will reinforce some of what they are learning in school. You can also talk about various payment methods (cash, credit, or Apple-pay, etc.) and the differences of each.
Play games like Monopoly and The Game of Life together.
There is no better way to learn than to have fun when learning. So seek out games that offer both enjoyment and a learning opportunity. Explain the choices the game presents and have them see for themselves the outcomes of their decisions.
Buy a small amount of stock together (or build an online tracking portfolio). Having vested interest in a company that is a part of your life together will help them understand entrepreneurship and investing. It can be a place you visit like your favorite restaurant, coffee shop, or any well-known company they know from using their products. And if you don’t want to actually make the investments, build a tracking portfolio online and monitor its progress. Hopefully the investments will perform well, but either way, it is a good learning opportunity.
The challenge of financial literacy is real. Educating early is the best way to prepare your child for what is likely to be a challenging financial landscape later this century.