Financial literacy for kids – Learn to talk about money as a family 

Financial literacy for kids means working to ensure that your child has financial knowledge and learns to apply it to their personal finances.

Unlike financial education, financial literacy is not only about understanding basic concepts and basic financial risks, but also about the skills, motivation and confidence to apply this knowledge to financial decisions. 

Therefore, in today’s content we will explain to you how you can introduce the concepts of finance into your children’s lives, whether they are children or teenagers.

This will ensure that they have a healthy relationship with money, so that they learn to use money consciously, based on their financial reality.

The importance of financial literacy for kids

Dreams, plans and achievements are directly related to purchasing power.

Therefore, when you teach your children to have a healthy relationship with money, you are also ensuring that they have a successful and prosperous life.

This is possible because children develop a sense of responsibility both for what is theirs and for what belongs to others.

It’s also worth talking about recognizing the importance of work when we think about Financial literacy for kids.

Money is not simply obtained.

It takes effort, dedication and hard work to have financial resources.

When children learn about finances early on, they can easily understand the importance of work.

Thirdly, know that it’s better to learn Financial literacy for kids than to relearn.

In the book Secrets Of The Millionaire Mind, the author shows how we develop behaviors according to thought patterns.

And thoughts are usually limited by certain childhood experiences.

For example, it is common for a person to have financial problems if, as a child, they always saw their family dealing with finances negatively.

This person has to work hard to relearn how to deal with money because the way they were taught wasn’t right.

This is because it’s not a question of learning a new concept, but of making that concept a habit.

And as we know, a habit is built little by little.

On the other hand, a child who has already learned Financial literacy for kids and the basics of finance at a young age doesn’t need to relearn them and has a much more prosperous and peaceful life.

The last major benefit that proves the importance of teaching your children about finances would be the strengthening of your relationship with them.

This is a way of strengthening bonds and broadening learning, allowing everyone to win.

When is the best time to discuss Financial literacy for kids?

Here, the answer is the same as with saving for retirement:

The sooner, the better.

And if you weren’t able to do this early on, it’s never too late to start.

Yes, it is possible to introduce financial concepts to children, especially from the age of 3 and 4 (when they talk more and have a better understanding of what’s going on).

But here’s the first tip of Financial literacy for kids:

The family should take the issue in a fun and light-hearted way, not as an imposition.

To ensure that your children have a good relationship with money, you have to make them see that financial resources are positive aspects of life that serve to achieve certain dreams.

Where money comes from

Now let’s talk about the other tips for introducing finances to children.

Young children don’t really understand where money comes from.

This leads many children to believe that credit cards are an infinite source of money.

In this sense, all a parent has to do is hand over the card and everything is sorted.

However, it is essential that parents show Financial literacy for kids by saying that money is a limited resource and that this resource must be obtained each month through work.

Only by working can you buy things for your home.

And because it’s a limited resource, you can’t spend more than you earn.

In fact, it’s possible, but it’s definitely not recommended.

In order to have a conversation to explain where the money comes from, an essential tip is to be clear.

Don’t be afraid to explain everything that’s going on financially.

Remember that deep down it’s our fear that the children won’t understand, which is why we have a bad habit of avoiding conversations.

There’s no point in hiding important facts or information. If the child has any questions, they will ask you.

So never forget: always talk clearly.

Financial literacy for kids, talking about values and costs 

Another basic concept would be to show the child that everything has a cost and a value involved.

This can be done simply with objects you already have at home.

You can also use gifts to talk about the subject in a didactic way.

Here we come to another tip: offer examples.

There is no better way for a child to learn about Financial literacy for kids than through good examples. 

This is because they come into contact with examples and process the information more fully and without communication failures.

And you don’t have to worry. Give examples of everyday things like the bills that arrive at your house.

Showing that water, electricity and gas, which are used every day, have a cost.

This is a simple way for children to begin to understand the world of finance.

Still using the example of bills, you should explain how the money is actually used when you talk about Financial literacy for kids.

If the bill costs US$75, introduce these amounts little by little.

Show a US$5 paper money, a US$20 and a US$50 to show how much the bill really costs.

At the supermarket, show a US$5 paper money and tell them what they can “exchange” or buy with it.

Also, emphasize that that paper money can’t buy certain products.

In this way, the child understands that you can’t buy everything with the same amount of money.

In other words, everything we buy has different costs.

This helps you to introduce the concepts of “expensive” and “cheap”.

Financial literacy for kids using pocket money 

Do you agree that your children will only have theoretical knowledge if you spend all your time teaching them how to pay a household bill with your money?

Since financial literacy for kids goes beyond theoretical knowledge to practical knowledge, your children need their own money.

We’re not talking about a large sum, but an amount of money that the child is able to understand how to manage and how best to use, without putting their personal budget at risk.

Therefore, set a monthly amount for the child or teenager to decide how best to use it.

For younger children, the ideal is to set a weekly or fortnightly amount, as their sense of time is different.

If you use a monthly allowance for a 6-year-old, for example, the financial lessons could be lost because they have to wait 30 days to receive the amount again.

Note that the pocket money strategy strengthens other teachings such as the need to research and think twice before buying a product.

In this sense, the child learns about priorities when it comes to spending and Financial literacy for kids.

Finally, pocket money helps the child understand the importance of saving.

If they spend everything in the first few days, they could spend the rest of the week, fortnight or month without any money.

Depth concepts

The ideal way to work with pocket money would be to introduce more in-depth concepts about saving so that your children know the basics of investments.

If your children are young, you could even explain to them that if they leave a certain amount of money with you for a few days, it can earn a certain percentage.

Note that it’s not necessary for the child to know all the characteristics of investments, as even adults don’t know for sure.

The ideal is for you to bring the concept into the child’s reality so they can learn about Financial literacy for kids.

With regard to savings, it’s also interesting to have a piggy bank.

One tip is to give your children transparent jars so that they can collect pennies and notes.

As a result, every day they see the amount growing and become even more excited about saving.

This money can be used for a special outing or to buy a dream toy.

In this sense, when the goal is met, celebrate the effort!

Financial literacy for kids, money requires choices 

In order to save money and achieve a big goal, the child will have to give up other things.

They may have to stop buying sweets at school in order to save money more quickly.

For older children, it’s even better to plan the purchase.

Let them see the product and know exactly how much it costs, so they understand how much they want to save and for how long.

And when it comes to the subject of pocket money and savings, be careful not to break agreements.

If you notice that your children are using the money in the wrong and unnecessary way and not considering Financial literacy for kids, but you still contribute a large part of the money so that they can buy a toy, there’s no point.

It’s certainly hard to see a child crying because they want a toy or candy, but keep your word.

Explain, gently and firmly, that money requires choices. And that, in this case, they spent the money on something else. 

It may sound harsh, but it’s really important that your children follow agreements and understand that:

Money is a limited resource

Here comes another interesting concept of Financial literacy for kids:

Teaching children that they should buy what is useful.

It sounds like a complicated mission, but it’s simpler than you might think!

To do this, try to explain to your child the difference between basic daily necessities and what can be dispensed with or postponed. 

Among the essential items, talk about food, hygiene and health.

Items such as electronics and toys can wait.

Also, try to avoid triggers if you want to teach Financial literacy for kids.

For example, children’s TV commercials awaken the child’s desire to buy something superfluous.

The commercial is so persuasive that it shows the child that they need it.

Talk about it and consider limiting the time they spend watching TV to avoid triggers.

Financial literacy for kids, donation and family financial decisions 

Along with financial responsibility comes social responsibility.

If you want your children to be successful people, while being humble and kind, encourage giving.

This helps build a social conscience, develop empathy and also teaches children to share.

This giving can be done through money.

For example, part of their pocket money can be given to a charity.

On the other hand, donations can also be made with toys and clothes.

You might want to set aside one day a month or every 3 months to look through the cupboards and sort out good quality items to donate.

On the other hand, keep in mind that you should include the child in the family’s financial decisions.

Some people insist that children shouldn’t be taken to the market.

But when we think about Financial literacy for kids, that’s not true.

Make a shopping list, set a spending limit and allow the child to buy only 1 additional item.

These are simple tips that will transform your trip to the market.

Also, ask for their opinion when choosing an outing or subscribing to a product.

What should be included or what should be left out?

Make them understand that they are part of decisions relating to the family budget and don’t forget to leave room for questions.

In this way, you encourage children’s active participation and stimulate critical thinking.

Another tip of Financial literacy for kids is to call the child when paying the credit card bill.

This is a way of further internalizing in the child’s mind that it’s not enough to simply use the card for every purchase, there’s a result afterwards and that result is the bill.

Lead by example and use books 

There’s no point in insisting that children start saving, take care of their cats and make kind donations if you don’t do any of these things.

Children will always look up to what their parents do, so you have to lead by example.

Maintain a good relationship with your finances, don’t buy on impulse, start saving for your retirement and your dreams.

Never complain about a lack of money or being overworked, as this creates a negative outlook on money.

On the other hand, reading can be used to your advantage of Financial literacy for kids.

There are a number of children’s financial education books that help you introduce the concepts to children through playful and engaging stories.

This way, as well as encouraging reading, you can have a good time as a family and teach them about important notions of financial organization. 

Among the book options, you can buy The Berenstain Bears’ Dollars and Sense, by Stan and Jan Berenstain.

Basically, the book shows children how to set a budget, save money and make purchases.

To teach young readers about various money personalities, there’s The Four Money Bears by Mac Gardner.

In third place is Ron Lieber’s The Opposite of Spoiled.

The main teachings relate to the value of being thrifty and giving to others.

Once the basics of Financial literacy for kids have been learned, move on to something deeper

Once your children know the basics, introduce deeper concepts.

For example, you can explain to them how a bank account works, and you can even insist that they have their own way to save money in a safe place.

If possible, take your child to the bank to explain how deposits, interest, investments and more work.

Here, it’s also important to talk about scams and fraud if you want to teach Financial literacy for kids.

Raise awareness about scams and financial fraud that can affect young people. 

Show them that no personal information should be shared in the digital environment and how important it is to check the credibility of offers.

Educate them about phishing emails, fraudulent calls and other common scams

Another way to deepen your child’s financial knowledge would be to encourage them to have an entrepreneurial mindset.

Show them that, from a young age, they can explore simple opportunities to earn money.

Whether it’s a lemonade stand, selling handicrafts, offering services such as pet-sitting or lawn-mowing.

All of this can be done to generate valuable lessons about earnings, research and profits.

It also encourages creativity, responsibility and perseverance.

Daniel 2 de April de 2024