3 Tips for Teaching Kids Financial Literacy
At the top of the list for what draws most people to entrepreneurship is the idea of financial reward. In addition, the allure of entrepreneurship is one of freedom, creativity, and fulfillment. Who can blame kids for being drawn to using their own passions and talents to create their own venture, all while earning some pocket money?
One of the valuable life skills that Kidpreneurs learn is the concept of money management. It can often be a challenge for kids to know how to properly save, invest, and spend money once a business starts gaining momentum.
Financial literacy is a key skill necessary for growing and sustaining a successful career as an entrepreneur. This means having the ability to make informed and effective financial decisions, both professionally and personally.
Research proves that children who handle and learn about money at an early age are more confident in their financial skills in adulthood. They feel more prepared to navigate financial lessons such as budgeting, saving, and donating their money. Children who are not exposed to instruction with money may be more challenged with fiscal responsibility and may not recover as easily from financial mistakes.
Guiding children in experiences with finances will provide them with a better sense of security and assurance when running their own business.
It’s never too early to introduce kids to the concepts involving money and finances. There are many age-appropriate ways in which to have conversations with children about money as well as for them to learn important financial skills. Below are three great financial lessons that can be shared with Kidpreneurs of all ages.
Identify Wants vs Needs
As adults, we all must make daily decisions around money. Part of that involves distinguishing whether a product or service we wish to spend money on falls into the category of a “want” or a “need.” This small act of discernment helps adults and children make better spending choices and to understand that there is not an infinite supply of money to purchase everything. You can help children learn this lesson by reminding them that needs are something we need to survive or function. Wants are things we desire but can live without.
One way to explore this topic with kids is to browse magazines together and talk about whether the ideas or items pictured are needs or wants. Incorporating the language of budgeting and spending into your daily routine will also help your kids become more aware of wants and needs.
Teach the Invest/Save/Spend/Give Concept
Children can grasp powerful concepts easily when we present them in a clear manner. Because money can only be used by the person who actually has it, there is great responsibility in the act of possessing money. Teach children that there are generally four actions that can be taken with money: invest it, save it, spend it, or give it.
Investing and saving are generally thought of as the same concept. However, in business, investing can be an act of spending or an act of saving. You can spend money to purchase better technology, upgrade equipment, advertise your business, or hire more team members. Spending that money ends up being a way in which you invest more of a commitment to your business. On the other hand, you can save or invest money by adding it to a savings or retirement account or purchasing stock options.
A kid-friendly way to teach this idea is to make it visual by buying a piggy bank that has 3 separate sections, labeled: Spend, Save, Give. Children can practice adding money to each section and write down goals for how they want to put that money to good use. You can make a DIY version of this by using jars labeled with each concept.
Because money is a responsibility around which we must make sound choices, it’s important to teach children how to respect money. This can start by reminding kids to handle their physical money with care. Instead of wadding up bills in a purse or pocket, show them how to organize them in a wallet. Have a dedicated place where they can toss coins, such as a jar or piggy bank, instead of having change collect in random spots around the house (or in the couch cushions).
Budgeting is another way to not only manage money but to show respect for your finances. Even young children can learn simple budgeting techniques and often embrace the sense of empowerment that comes with it. As a bonus, budgeting instills and strengthens mathematical skills!
Economic Awareness is Priceless
Learning the ins and outs of economics and how money works is a life skill that will greatly boost your child’s confidence and business competency. Having an awareness for where money comes from, where it goes, and the choices you have with it is a powerful life lesson and helps give Kidpreneurs a leg up in their business venture – and in life!
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