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Before the Great Recession, not everyone was convinced that you should tell your kids about your finances. It was a subject that most of them want to keep between parents while the kids go play in the other room.
Well now, that is not the wisest thing to do. While we do not want our kids to start earning their keep at an early age, we do know that they need to understand the value of money early on. After everything that we have been through, it is never too early for a child to start learning about financial matters.
This is the reason why personal finance for kids is such an important topic that you need to learn.
Truths about teaching personal finance to children
We came across an inspiring article on Newsweek.com about this 8 year old boy who is earning millions of dollars off Facebook. His name is Evan and he is the star of EvanTubeHD. It all started as a hobby between father and son. Evan’s father, Jared, runs a photography and video coverage and they decided to do stop-motion clay model videos of Angry Birds - complete with special effects. It was such a hit that viewers started to request that they review toys and video games. Soon, the channel racked up 272 million views from all over the world in a few years. The whole family is in on the project now, even Evan’s little sister and mom. However, Jared is saying that he and his wife are careful about how they will handle the money streaming from the YouTube videos. They said that they maintain their business and do not rely on the money they get from the advertisements on their channels. Instead, they make sure it goes to savings and investment accounts for the children’s future.
While this huge amount of money is primarily brought about by the little boy, you can see how the parents of Evan is playing a huge role in making sure that this money will be put into good use for the benefit of the child. It is not indicated in the article if Evan is aware of the small fortune that he and his sister has but it is important to note how the parents are automatically using it to invest in the children’s future. That is a great way to teach personal finance for kids. Because of what Evan’s parents are doing, the kids future will be more secure. They can go to college without going into debt and they have some capital saved up in case they want to set up their own business when they get older.
Teaching kids smart money management skills early on does not mean you have to turn them into Internet superstars. It simply means you have to let them know the basic concepts like saving, spending and earning. A lot of parents concentrate on saving - which is okay but it is a bit incomplete.
According to Investopedia.com, teaching personal finance for kids should include the relationships between saving, spending and earning. They have to know where the money is coming from. That is how they understand why they need to save and spend the right way. Without telling them about earning, they will not understand the value of money. After all, money becomes valuable because you work hard for it. When you work hard for something, it becomes more important to you. That is the important concept that your children should grasp as they learn about money.
Couple of tips about financial literacy for kids from parents
Of course, teaching personal finance for kids is easier as a theoretical lesson. However, that is not the best way for your kids to really grasp the concept. It all depends on the implementation and how you relate the financial concepts in the daily lives of the kids. The road towards financial literacy will only be successful if you include the practical applications of the concepts.
Each child is unique so there is no one formula in teaching kids about money. Parents should understand the mental capabilities of their children before finalizing how the financial lessons should be applied. But that does not mean you have to start from scratch when determining the activities that you will use to drive the lessons home.
We found a couple of suggestions from TheMint.org that you might find useful when it comes to teaching personal finance for kids. The site believes that learning about finances really begin at home and some parents have posted their suggestions in the Parent Blog page. Here are a couple of the suggestions you will find here - according to the seasons of the year.
- The coming of fall means Halloween costs are around the corner. Encourage the kids to scout for candy and costume coupons online or in the local newspaper and tell them you will match the savings and put it in their accounts. Or, get them to create their own costumes from scratch and give a reward after.
- Winter marks the start of the gift giving season. Teach the kids that giving is more important than receiving. Bring the kids to volunteer activities within the community. Ask them to come up with personalized gifts that the whole family can work on.
- Spring does not really bring about too much expenses so saving lessons should be perfect during this time. Get them to save a part of their allowance so they can spend it during the summer break. Let them create a list of things they want to buy in the summer and activities they want to do and encourage them to save up for it. Give them rewards for chores they do around the house so their savings can pile up in time for summer.
- In the summer, older kids should be encouraged to get summer jobs to help them save up for college. Talk to them about student loans and how you can both work on helping them avoid it. For smaller kids, let them come up with “staycation” ideas that can save you money on travel expenses. Camping in the backyard or sleepovers should be a fun activity.
The suggestions from the Mint website indicate that personal finance for kids can come in all forms depending on what the current season dictates. Make it timely activities so that the children will find it more interesting to work on. If they can relate to the activities, you can be sure that they will develop the interest to listen and participate in the lessons that you are trying to teach them.
Here is a video from the YouTube channel, Howdini, regarding teaching kids about money management. It features the thoughts of personal finance author David Bach about how he learned his first personal finance lesson from his grandmother. He also provided a couple of tips to encourage parents to seriously make their children great money managers.