Making sure that your kids understand how money works is very important — it’s a life skill they will use every day and will thank you for it later in life.
The way in which we can teach our younger generations about financial literacy has expanded, technology has changed the way we live, work, and even save. Children learn a lot about how to handle money by watching their parents in the same way that they learn by observation in many other areas of life, so be sure to set a good example.
Being there for your kids, equipping them to navigate life, and giving them practical experience is the best way to make sure they are in a position to make good choices. Giving your kid an allowance is one way to get them to start to understand what things cost and how to budget and save. It also teaches them the value of production and exchange — the concept of producing something of value for something else of value in exchange for that service or product, whether it be taking the trash out for you once a week or tidying up their bedroom.
Once your child understands that people exchange money to buy things they want, you can start increasing the allowance and putting a chore list together with values attached to the chores, so that they understand the value of time and money. You can add bonus chores as well, so if they are saving for a large item, they take advantage of extra income opportunities.
Planning for a big purchase like a gaming console or a cell phone or a bike is a good target to set. Another way to teach them financial skills is to help them get a healthy attitude toward credit. You can loan them the money to make a large purchase, and set up a payment plan attached to earning potential connected to their chores. Once they have paid you back, they will have real-world knowledge of how credit works.
There are several great apps available to assist you with getting your kids up to speed when it comes to money.
Savings Spree is a seriously fun app that is available for children ages 7 and up. It’s a game show hosted by a talking piggy bank designed to teach kids about money. Savings Spree shows kids that they can save their money for short-term goals, spend wisely by planning, and making smart decisions. They also learn about investing for their future.
Bankaroo is a virtual bank for kids where they can learn about the value of money in a safe environment. According to their website, they teach kids how to budget, save up for goals, and spend responsibly. They have an app and a website.
Famzoo is a family finance app that is suitable for kids from preschool age right up to college. Each family member is issued a card that is linked to the app. The way it works is the parents are the bankers and the kids are customers. Famzoo offers an environment to learn from first-hand financial experience with the safety of being monitored by parents. It is a useful tool for kids to understand how money works. They get experience with budgeting and saving.
Motion Math: Cupcake! is a fun game that teaches real-life money lessons. You run a cupcake delivery business. You learn as you buy ingredients, design cupcakes, set prices, and deliver to customers.
How you go about teaching your kids financial literacy is up to you, but the better you do it, the bigger the pay-off down the line.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC