Teaching your child about financial literacy is a necessity, but it doesn’t have to be reduced to something as boring like filing for your taxes. Raising money savvy children can teach them from a young age, the value of money and how to save. We have five tips sprinkled with a dose of fun on how to teach your child to become financially literate.
Bring it down to their level
Research by OECD PISA showed that 50% of Australians speak to their parents about financial decisions. Which means you already have a foot in the door for departing your sage advice that you have garnered over the years. However, with years of experience you already understand financial jargon which could sound like a foreign language to a child. When teaching your child use relatable terms for youth, and practical examples that will make it easier to understand.
A practical fun example
There are a range of activities that you can carry out at home to help them understand the value of money. The Commonwealth Bank released a survey showing that almost 80% of parents pay pocket money, with the average starting age being six years old. Instead of simply giving them allowance, you could set up a token economy. Chores can now gain certain monetary value that will not only encourage them to clean up, but it will also help them understand that you must work for money. For an added twist, you could reward your child for doing chores they were not instructed to do.
Release their inner entrepreneur
The summer holidays are here. This is an opportune time to get your child to dream on how to turn what they enjoy doing for fun into money. Release their inner entrepreneur by using what they enjoy the most, so it doesn’t make the experience arduous. Help them to dream big by guiding their vision with these questions:
- What do you want to sell?
- How are you planning sell the products?
- How much money do you want to make?
- What are you planning to do with the money you make?
Let their imaginations run wild by dreaming big, and kindly bring in the questions above as to how they will achieve this. Keep in mind that it is going to be their business, not yours. Allow them to fail and make mistakes. This in turn will help them learn next time how to better run a business, or handle money.
The power of Edutainment
Children are visual learners who learn from watching and doing. In the not so distant future, your child could become part of the 81% of students in Australia who have a bank account or a prepaid credit card. By teaching them financial literacy they stand a chance of being part of 57% of students who regularly save money. You can tap into this aspect by using edutainment tools that will not only entertain them, but will also low key educate them. Financial institutions such as Visa has created a comic book, and a game that teaches children about saving. More apps are being developed to creatively inform your children, which comes with no cost to you.
Teach them how to save
Teaching your children to save from an early age will help them immensely in the future when dealing with larger amounts of money. We live in an instant gratification society, that has caused many Aussies to have unnecessary debt. Saving will help your child know the difference between needs and wants. It will also help them have self-control when it comes to their finances. Whatever amount of allowance you give them help them to save with the 50%, 40%, and 10% rule 20%. Let them save 50%, 40% can be used to spend, and the remaining 10% can be given to their charity of choice.
You could also invest on your child’s behalf. Speak to a financial institution to help you choose the best account and investment deal that will benefit your child.