Many people grew up believing myths surrounding finances, and one of the most popular ones is that money is the root of all evil. This is a misconception because it can guarantee plenty of great opportunities, such as having enough to pay for college and saving up for your retirement. It is just a matter of practicing self-control and knowing your priorities, particularly when you start understanding the concept of money, like during childhood.
As a parent or guardian, you should be responsible for starting your child’s financial education as early as possible, so it prepares them for a bright future. Here are some practical lessons that can help them understand the importance of financial literacy and why it must be taken seriously:
How does earning money work?
In the adult world, money is earned in exchange for hard work. This can be taught to your child by encouraging them to complete some tasks to bring in cash for themselves. For example, have a series of chores for your kid to complete throughout the week. Just don’t let them off easy if they don’t do the task properly to appreciate the value of working hard. Once they successfully fulfill them all, give them an allowance for their efforts. Track the chores and money earned with a sticker chart on the refrigerator or using a chore app.
Why is saving money essential?
Everyone is encouraged to save money, but only a few understand its importance on a deeper level. Make sure your child learns about it by teaching them the concept of the power of savings and saving money early. Give them some piggy bank or savings jar that can act as their savings account. You can even use savings trackers to monitor their progress and inspire them to accomplish their financial goals.
Why is budgeting important?
After teaching your child how to earn and save money, they must know what they should do with it. This is called budgeting. The best way to do this is to let them differentiate between their wants and needs. As they create their budget, their needs must be the top priority, while their wants have to wait until they save up enough money. By developing this habit, they will learn how to manage their funds.
When should money be shared with others?
Sharing money with others is often overlooked when teaching financial literacy, but it is an essential money lesson. Charitable giving helps other people and benefits the giver. Because of this, if your budget allows you to do so, consider contributing to charities and encourage your child to do the same when they earn their money.
How does credit work?
Show your child how borrowing and repaying money works through credit. Explain to them that you can avoid high interest fees if you pay the credit card issuer right away. In addition, if your little one is ready, consider adding them as an authorized user on your credit account. It can be a great way to build credit for kids.
Teaching your child important money lessons means giving them a head start. This will help them prevent them from having bad financial habits, like failing to budget, taking on too much debt, and overspending. As a result, they will be better equipped to lead a financially literate, independent, and successful life.
Give your child an excellent financial foundation by using Kiddie Kredit. It is a money app for kids designed to educate little ones on the credit scoring system in the US by completing chores. Download our app today!