Back in the day, our lives and even more so, our parents’ lives were more or less constricted, straightforward, and limited. The lack of technology and resources narrowed our possibilities to develop in the direction we and our parents always dreamt of. And, on the even more extreme side, some people from the agricultural parts of Europe wouldn’t even make it to a capital city – ever.
The brightest part is that today, our kids’ lives can be vastly improved. Now, we have all the endless means to do it. We have the right infrastructure for acquiring new information, right at our fingertips. We can take courses of all the right kinds to become tomorrow’s popular entrepreneurs. There is access to all these crazy apps like KidsFinance that easily teaches our children the ins and outs of finance. Well, you got the idea..
Nowadays we have all the pieces of the puzzle and we simply just have to put them into place to have a complete, comfortable and fulfilling life. Our kids’ can become successful business people with a deep understanding of how money works, how to manage it, and how to amplify it.
But where do you start from? Well, for this, we have compiled a list of teachings you can use on your kids from a very early age to prepare them for the future of finance. In no time, they will be prepared to use our developed infrastructure to become the masters of their fate.
To get the results, people with a financial interest were asked the next question:
How does one exactly go about teaching financial literacy to children? Are there any tricks that you learned over the years or tried-and-true (proved) methods?
Teaching 1. General Principles –Open Dialogues, Trial and Error, Impulsive Buying.
“I was taught the value of spreading money farther through shopping sales and clearance (if I know I can wait for sales to stock up, I'll wait), the difference between needs (I've outgrown all of my clothes) and wants (that new video game looks awesome), but also that it's ok to spend money thoughtfully on fun things, like seeing a movie or buying a new accessory.
We talk about how working gives you money, but that money is finite. For example, we can do this activity that requires money now but then we need to wait until the next month to do the next activity.
Letting them make poor choices through impulsive buying so they can see the consequences of not thinking ahead and depleting all their money.“
Teaching 2. Allowance
”From early on the kids get an age-appropriate amount. They are expected to save 10% and donate 10%, the rest can be divided however they choose between immediate spending, saving, donating. We encourage them to set goals for the savings, if they want things we wouldn't usually buy them.”
Teaching 3. Budgeting
“Before college, my parents had me budget out ALL of the costs associated with a 4-year college education--tuition, fees, housing, spending money, school supplies, etc--with 8-10% increases built-in per year. This not only helped me pick a school-based partially on price (including out-of-pocket and scholarships), but was a contributing factor in me never skipping class (I knew how much each class had cost me, and how hard I'd worked for that money). I later converted that budgeting system into the monthly budget I use to this day.”
Teaching 4. Planning
“I will never complain about money. I will make it abundantly clear that the money I have and spent is the result of a very predictable past series of events. I will tell them that you can plan decades in advance within a reasonable margin of error. There will be no tricks involved. They will know they are risking their futures if they don't save at minimum 25% or ever take on non-house debt.”
Teaching 5. Interest
“At a very young age, my parents taught me two things. They taught me about interest. They allowed me to collect 10% interest on my unused allowance every month. When I was 10 or 11 I was able to purchase a used game at Video Update every month.
What comes along with that first lesson, is that you learn to save as much money as you can. I became really frugal. Instead of eating a normal lunch at school, I would pocket my lunch money and eat the peanut butter sandwiches instead. Instead of getting a sweet car when I was 16, I used the bus every day.
When I was 17 I looked around and found a 1998 Dodge Stratus with 98k miles (158k km) for $3k (€2.5k).”
Teaching 6. Savings
“You should also encourage them to save money and put it in the bank. My savings account was never something I was allowed to take money out of, it was always for college/the future/when you're an adult. Whenever I wanted to save up for something, I started saving then, even though there was more than enough in my account. That's a good habit that has carried over into my adult life.”
Teaching 7. Basics of Investing
“Teach them the basics of investing by taking them to the bank and buying a savings bond. Looking back, many of my $50-100, 20-year bonds, probably weren't the wisest investment, but they taught me the virtues of saving, planning for the future, and investing.”
Teaching 8. Leading by Example
“Lead by example. From an early age, they should see you practicing good habits. When I first learned what a credit card is, it was accompanied by an explanation that you should always pay it off 100% each month so you don't pay fees. From then on, it was ingrained in my mind that a credit card is a good way to get rewards, protect your money, and build credit, but not a way to buy things you can't afford. Now, when I sign up for cards, I don't even look at the APR because I've never paid interest on one.”
And with this, we conclude the list with our teachings. But what about your teachings? How do you teach your children about money?