Financial literacy is an important part of having a successful life. But a Forbes report on the financial literacy crisis found that only four in seven Americans know how to handle their money. With household debt rising by $3.5 billion in the third quarter of 2021 alone, it is clear that more people need to learn this skill.
One way to do this is by instilling a sense of financial responsibility from a young age. As such, 20 states across the country now require personal finance classes to be integrated into public school curriculums.
But this might not be enough.
As parents, it is your responsibility to supplement this education by promoting better financial literacy at home, too.
If you want your kids to have lifelong financial literacy, here are some of the things you can do…
Teach Them Discipline
Once they have a source of money, kids – especially younger children – might have the urge to spend it on frivolous things like toys and candy. It is important that as their parent, you urge them not to and instead, teach them to be disciplined with their spending. Our past feature on ‘How to Instill Grit in Your Kids’ explains that it is important to challenge your children in order for them to deal with adversity and become successful.
A way this can be done is by letting them save for a toy they really want instead of buying it for them. Not only does this incentivize saving, but also allows them to better grasp the value of money, teaching them greater financial literacy in the long run.
Provide Necessary Resources
A study published in the Journal of Financial Counseling and Planning explains that adults that were given adequate financial education from their parents had healthier financial decisions. In line with this, you should provide your children with the necessary resources for them to better learn how to manage their money. This way, they can learn about financial literacy on their own time even without you with them.
Books on saving and investing (such as Everything Money by Kathy Furgang and Fredrik Talmage Hiebert) can teach them a great deal. You can also let them watch shows and videos that explain these concepts in a way that they can easily understand.
If you do have extra time, you can even optimize these resources by going through them together. This way, you can bond and learn about finances together.
Encourage Continuous Skill Development
After being educated on different aspects of money, it is important for parents to encourage their children to apply what they have learned to real life. You can help them build a budget based on their understanding of their needs and financial resources. You can also help them choose to open a savings account that has an interest if they believe it is a worthy investment.
By fostering this knowledge, they will be able to continuously build their financial literacy and interest in skill development well into adulthood – a necessary undertaking to set them up for success.
LHH’s article on the importance of learning highlights how continually learning and building skills are essential for the future. In fact, 73% of business organization leaders believe that building employee-critical skills and competencies are top priorities, especially as there is a concern that employees can be left behind as the nature of work changes.
Thus, not only will teaching your children financial literacy help them become fiscally responsible adults, but also ensures that they continue to nurture an interest in learning that can benefit them into adulthood.
Be a Role Model
It’s no secret that many children like to mirror the actions of their parents. Research from Discover on parental influence highlights that kids pick up on the consumer behavior of their parents. They are also the primary source of a child’s financial literacy.
This is why being a good role model plays a part in your kid’s understanding of money. If your children see you making big unnecessary purchases that don’t fit the budget, there’s a chance that they will repeat this in their adulthood.
You should show them that you are able to save, track and plan your expenses, as well as invest your money. By being a role model, they will have a concrete example to emulate.
Financial literacy should be taught both at home and in schools. As parents, there is a great deal you can do to not only foster this knowledge but also encourage a pattern of continuous learning towards the subject.
In the long run, your children will grow up to become financially responsible adults constantly doing what they can to become better at managing their finances.