The Importance of Financial Literacy
When you were a kid, how did you learn about money? Was it through a parent? A friend? Yourself? Well, odds are you probably didn’t learn it in school. That’s because many schools don’t recognize financial literacy as a life skill, even though it’s more essential than ever.
It may be hard to admit, but money is a key aspect of life. It affects almost all of our decisions, yet, so many of us don’t understand it. The National Endowment for Financial Education found that only 24% of millennials demonstrate basic financial literacy.
One great advantage of homeschooling is that the curriculum is controlled by you. Public education may not teach financial literacy, but you can. Incorporating money management into your child’s education can help them get ahead in life and better prepare them for the future.
Teaching Financial Literacy
People who lack financial knowledge are more likely to experience debilitating debt, low credit, unattained goals, and relationship issues. Teaching basic concepts to your kids early on can help them achieve financial security and success when they enter adulthood.
A Cambridge study showed that children are able to understand the concept of money as early as 3 years old. Before a child turns 7, they have already formed their own money habits simply through observation. So, the earlier you teach your child about money, the better.
Incorporate Money into Mathematics
A great way to get your child familiar with money is by incorporating financial literacy into their math classes. Concepts like counting, taxes, exchange rates, and compound interest can all be integrated into their math lessons.
Start with getting them familiar with coins and dollars, then work them up to more complex problems. Try to involve your kids in spending activities, like grocery store visits, to give them real-world experience. Doing this will make financial lessons more memorable and meaningful. Teaching money through math will help your kid calculate and understand the actual cost of goods, and help them make better financial decisions as they grow up.
Motivate Children to Earn
It’s hard for kids to learn about money if they don’t have any. Rather than simply giving your kids money, create opportunities for them to earn it. Not only will this give them a sense of independence, but it’ll also teach them the tough lesson that money isn’t given, it’s earned.
Encourage your child to get a part-time job or, if they’re too young, give them money for doing more complex chores. When people earn their own money, they’re more responsible with it. Teach your child smart ways to budget their money. This will help your child make wiser budgeting decisions and will help them prepare for a financially secure life. If your child asks to borrow money from you, have them pay it back. At some point, everyone has to pay their debts. Introducing these concepts to your child will better prepare them for real-life situations.
Instill Positive Saving Habits
Most children are introduced to money as a way of getting things. You give money and you get what you want. Although this is a good concept to understand, it’s equally important to teach your kids about saving money. Many adults still don’t understand the importance of saving and often are quick to overspend their income. By incorporating the idea of saving money into your child’s curriculum, you will make your child more disciplined on how they spend their finances.
Take your child on a field trip to open up a bank account and help your child set up saving goals. If they want a new toy, encourage them to save for it. This will give them hands-on experience with saving and get them familiar with banking concepts such as interest, fees, and balances. Learning banking concepts will also allow your child to understand where best to place their money as they grow older. Instilling positive saving habits will be especially advantageous when your child becomes an adult. Rather than relying on impulse, they’ll be more cautious about what they spend their money on.
The world is slowly moving away from cash, which makes teaching your kids about credit all the more important. Having good credit and knowing how to manage it, is one of the best ways to stay ahead of the game. Credit scores affect so much from getting a job, applying for credit cards, getting loans, and more. Even big milestones, like buying a home, factor in credit score to determine which loan you can get.
Teach your kids the importance of credit by breaking down what a credit score is and how it impacts everyday life. Consider getting your child a credit card or adding them as an authorized user to yours. Not only will this show them how to responsibly use a credit card, but it’ll help boost their credit score and allow them to make better unguided financial decisions in the future.
You hear it all the time “I wish I invested earlier.” So many adults make the mistake of investing too late in life. Most of the time this is due to a lack of knowledge in finances. When it comes to investing, time is your best friend. Start off by teaching your kid about the fundamentals of investing, such as the risks involved, different kinds of investments, and the types of interest. Use companies your child is familiar with to help visualize the idea of stocks. There are many online investing simulators for kids to learn about investing without using real money. However, when your child starts their first job, encourage them to take part of their paycheck and invest it. It’ll help your child passively make money and will give them more confidence to make smart investing decisions.
For More Help
A great education is key to a successful life. If you are just getting started with homeschooling, or need guidance on how to best teach your kids, look no further. Homeschool Idaho provides online courses that will answer all your homeschooling questions and alleviate any worries or fears you have.