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6 Ways to Help Kids Become Financially Literate
By: Stacy Yu
Learning how to use money responsibly may be one of the most important life lessons any child can learn. Doing so will make a huge impact on their overall financial health and success as adults. Teaching children about the value of money and how to manage funds wisely can feel like tricky business. However, providing these lessons can be much easier than you think.
Here are just a few tips on how you can begin teaching your children about money.
1. Find Teachable Moments
Teachable moments happen all the time. At the grocery store, restaurants, while paying bills, and any time you use a credit card or visit an ATM. Take the opportunity to explain how these transactions work. Topics like where money comes from, how a credit card works, and why you need to pay bills on time tend to bring up lots of interesting and eye-opening questions for both you and your child.
2. Play Games
Games such as Monopoly® and The Game of Life® are lots of fun and provide good lessons on how money works. Take an evening and enjoy family time with these games, while teaching them some of the basic principles of financial responsibility.
3. Distribute Allowances
There is a lot of debate over whether or not kids should get an allowance to practice money management. If you do choose to give your child an allowance, here are a few helpful hints to ensure that the proper messages about financial responsibility are being taught.
Give your child their allowance in small denominations, such as coins or small bills. This gives your child a visual understanding of how the money grows and disappears. Using smaller denominations also allows for a much simpler way to practice and gain a firm understanding of how monetary distribution works.
Determine if the allowance will be tied to chores. If the allowance is tied to chores, be sure to also include chores on your child's list that are independent of the allowance. This will help reinforce the message that although they are compensated for some chores, in general, chores are part of being a family - everyone needs to contribute, regardless of compensation.
4. Let Children Make Their Own Purchasing Decisions
Part of learning is practicing. By letting them learn from their own purchasing mistakes when they are young and the stakes are low, it will make them better money managers in the long run.
5. Teach Children to Evaluate Advertisements
When children are young, they often take what they see on television or hear over the radio as the truth. Sit with them while watching television and talk about what they see on commercials. Help them understand that, sometimes, seeing isn't always believing.
6. Open a Savings Account
Opening a savings account is a great way to make the concept of saving a reality for kids. Bring your child with you to open their own savings account. Doing so will help the child make a physical connection with where their money is going and how it will be used. Opening a savings account also opens the door to conversations about interest and investing. To give children an additional incentive to save, MAFCU's Cash Critters Club offers kids up to 13 years old, 5% interest on the first $500 in the Cash Critters Club Savings account. Teens, ages 14-20, in the Student Plus program receive 2% APR on the first $500 in both the Savings and Checking accounts. Click here to find out more about MAFCU youth accounts!