Financial Literacy for Kids: Why It’s Important

Money doesn’t grow on trees but do your kids know that?

As parents, we must teach our kids basic life skills, and that includes talking about money. Basic financial literacy for kids is an important part of educating your children.

We are tasked, as parents, to teach our kids skills for life. At a young age, we start by teaching them that things are dangerous. We don’t touch fire or run in the street. As they get older, we need to teach them more life skills. We teach them to get along with others, cook, clean, cross the street, and how to read. Then, we move on to teaching them how to drive, how to have safe relationships, and how to, eventually, live on their own.

Parents have a responsibility to teach their kids about money. Financial Literacy is a life skill, just like anything else.

For some reason, the brass tacks of money and financial literacy get lost in the shuffle. As a result, many parents refuse to talk to kids about money and certainly do not get into the details of how and when we need to manage our money, budget, or save.

There are so many young adults who are at the point of starting their lives without their parent’s guidance and are clueless when it comes to how money works. I am not talking about the intricacies of dealing with stocks and bonds, dividend investing, or real estate. I am talking about the basics of how money works. You have to pay your bills, and credit cards aren’t just giving you money for free.

Financial Literacy for Kids: Parent’s Responsibility

I think that it stems from insecurity on the parent’s end. Money is taboo in our society we can’t bring to be open to our children about it. Either we are embarrassed by how poor we are, or we are embraced by how rich we are or are embarrassed by how middle-class we are. Our parents never spoke about money to us, so why should we talk to our kids about it?

We satisfy them with platitudes such as, “It’s ok” or “We can’t afford it” without going into the details. We never say, “We have money saved for this, so we can afford it now,” or “We can’t afford that expensive toy because our budget is lower than that, but we can afford something less.”

Talking about money to our kids and in front of our kids in a prosaic and non-emotional way will help our kids understand one of the most basic life skills.

Growing up, talking about money was taboo. No one discussed how much they made, how much big things cost, or whether or not they could afford something. Of course, not being able to afford something was a given, but it was embarrassing to admit.

Why?

I guess that my parents and their friends very much considered “struggling” to be shameful. A personal failure. Something that reflected poorly on them as individuals. Not having enough money or even choosing to be frugal is looked down upon. So we have to teach our kids that struggling with money is not shameful, embracing, or somehow a moral failing.

Encouraging financial literacy for kids will not ensure that our kids grow up never having worried about money. However, it will give them the tools and ability to realize how money plays a role in their lives and choose how they want money to play a role in their lives.

We must never fight or put the burden of our money on our children, and we should never make them feel that the burden of finances is something they should worry about or, worse, feel guilty about.

We should talk about things and be open about things, but we should NEVER make them feel that caring for them is a financial burden.

This comes up specifically when talking about tuition for private schools or daycare. When we talk about the high costs of educating our children, it should never come across so that a child may interpret as negative about THEIR education or how well they perform for the value. They should never feel guilty that we have chosen to raise them how we decided to.

So many of us do not have a healthy relationship with money. This can cause many issues when it comes to taking care of ourselves or how we handle our relationships or life choices. Our responsibility is to teach kids how to have a positive relationship with money because it does not come naturally.

By teaching the basics of financial literacy, we can teach our kids to feel optimistic about money- when you know how it works, you can make it work for you. We don’t need to be burdened by money. Money is a tool that can either be harnessed for good or bad. It’s not about money, but money is an integral part of our lives that we absolutely cannot avoid.

By taking the time to teach kids about money now, you can help them build a healthy relationship with money and a kind and generous spirit.

How To Teach Financial Literacy to Kids

We start to educate kids about money by talking about it in our homes. It starts at a very young age by explaining why and how we buy and do what we need to do. Teaching them that resources in our home cost money can be started at a young age in a non-judgmental way.

There is no need for kids to reach adulthood to realize that we must pay electricity bills or that water costs money. (As an extra perk, we can teach our kids not to waste resources and be responsible for the earth simultaneously).

Kids must know that money is a topic that is open for discussion. It’s ok for them to ask questions and get truthful age-appropriate answers. You can also start the conversation by having them read books about money for kids.

How To Teach Kids About Money

1. Make it physical
2. Show them it needs to be earned.
3. Let them earn their own money.
4. Let them spend their own money.
5. Encourage generosity

You can read more about these 5 ways to teach kids about money.