April marks the start of Financial Literacy Month, a nationally recognized movement to promote and support financial understanding in children and teens. For many, it's a fantastic opportunity to teach and connect with your children or grandchildren. Recent data shows that nearly 74% of teens desire to be financially literate, and 86% want to learn how to invest.1
How to Start
It all begins with a candid conversation regarding finances. By demonstrating your openness to discussing what many consider a "taboo" topic, you're also modeling how to approach finances for your young learner. They’ll learn to view financial issues and goals clearly with little to no unnecessary stress..
Children Learn by Doing – Children learn best by doing. When you give your child an allowance or a small amount of money to manage on their own, they will be more invested in learning smart financial habits. Consider giving your child a monthly allowance or opening a savings account at your local bank to save any money that’s gifted to them through family members, gifts like Christmas money, or if they are working and want to save a little extra cash. In doing this, you’re teaching your kids how important it is to have a savings account tucked away but can also introduce how interest works.
Share Your Families Budget – In addition to learning the importance of saving your money, it’s critical to teach your kids about the basics of budgeting. Educating your children on how much basic household necessities cost by showing them examples of your household bills like heating and air or electricity is a simple place to start. If your children are older, you can include them in budgeting for your monthly mortgage payment and how cash flow works in your household through your and your spouse’s jobs. Through this, your children can learn the importance of a dollar and how much it costs to live in 2022.
Have Open and Honest Conversations – Having open and honest conversations with your kids instead of keeping them in the dark to shelter them from possible financial struggles can be advantageous for their future. It’s common for parents to want to hide their financial failures so their kids can remain confident but, if possible, find small ways to share information with them. Like if you’re paying off high-interest credit card debt and explaining what that means and how it works. These difficult conversations around debt and budgeting will allow you to set your child up for a sound financial future by providing them with the necessary tools to succeed.
A Bright Future
Children who are taught personal finance from a young age are more likely to secure lower-cost loans and grants when paying for college and less likely to rely on private loans or high-interest credit cards.3 When money discussion begins early, kids are well-informed to make better financial decisions when they turn 18.
Let us know if you decide to put your "teacher" hat on this month. We're always happy to help educate and support our future generations.
- Greenlight.com, 2021
- Greenlight.com, 2021 I could not find this footnote reference in the document. I may have skimmed right by it.
- CNBC.com, 2021