This post is sponsored by First Alliance Credit Union
Believe it or not, the biggest factor of financial success isn’t how much money you have. What really determines financial success is financial literacy—the ability to know how to effectively use the money you have.
It’s hard to understate the advantages when you teach your kids about money. Children who learn financial literacy tend to have a lot less debt than other children when they grow up are better prepared to deal with financial emergencies and even reap the benefits of investing more money earlier.
While financial literacy does encompass a lot of topics, the good news is that you don’t have to teach them to your children all at once. Even better, there are a lot of ways you can learn about financial literacy as a family.
Play Games That Involve Money
One of the best ways to teach kids about money is by doing so without your child even realizing that they are learning. Play games with your children that include a financial element. Monopoly and Life are two of the most common financially-themed games, but there are a lot of other board games that can teach financial principles, including:
- Ice Cream Empire
- Settlers of Catan
- Day Trader
- Merchants of Amsterdam
When you play these games with your children, help them strategize during the game and perhaps even suggest multiple ways they can put their in-game assets to good use. This will help your child learn the importance of concepts like budgeting and planning for the future, all under the guise of play.
Help Your Children Set Goals
Another great way to teach your kids about money is to talk with them about their goals. Your first step should be to sit down with your children and ask them what they would like to buy if they had the money.
Once they’ve listed around five or six things they’d like to buy, discuss their goals with them. Talk about which items are short-term goals they might be able to get in a few weeks and which items are long-term goals that might take a while to achieve. Then ask your child which item they would like to buy first and which items they want to wait on.
Talking with children about what they want to buy gives them goals to work for. It also helps them understand that they can buy some things immediately, but they may need to save for others.
If your child is a little older, you can take the discussion one step further by teaching them about S.M.A.R.T. Goals. In other words, show them how to make their goals Specific, Measurable, Attainable, Realistic, and Time-Bound. It’s worth mentioning that First Alliance Credit Union has a free downloadable S.M.A.R.T. Goals packet that can help your children set their own S.M.A.R.T goals and track their progress toward the goal they’ve selected.
While you can talk with your children about their goals one-on-one, you can also do it with the entire family. You and your partner can start the discussion by talking about your financial goals, then ask your children to write down their goals and share them with the rest of your family. You can also print out SMART goal worksheets from the free S.M.A.R.T. Goals packet for everyone, and your older children can help your younger children fill out the pages.
Give Your Kids an Allowance
Of course, your children will need money in order to reach their goals, and the best way for them to get money is by giving them an allowance. Giving children an allowance gives them first-hand experience with money, including the rewards of careful spending and the risks of spending impulsively. Children also feel a greater sense of appreciation for the things they buy with their own money.
There aren’t any strict guidelines on how much allowance to give. However, you’ll probably want to link your child’s allowance to their chores in some way. This will help familiarize them with the concept of working to earn money.
When you give your children an allowance, try to do it when all the family is present. You can give each child their allowance and reiterate why they’re receiving that amount. You might even want to ask them if they plan on using part of that money to achieve their financial goal.
Help Your Children Create a Budget
Admittedly, setting up a budget is not something that comes to mind for most people when they think of fun family activities. However, it is a vital part of financial literacy, and it will give your children advantages that will help them for the rest of their lives.
You can introduce your children to budgeting by getting one of your paychecks in cash instead of direct deposit and taking it home to show your children. Then write down your budget categories on separate envelopes and show your children where your paycheck goes each month. You can also talk with your children about what items in your budget are necessary items, like mortgage and groceries, and why they’re a priority.
Once you’ve shown your children how to create a budget, you can help them create a small budget of their own. One of the most popular ways to do this is by setting up three glass jars labeled “Save”, “Spend”, and “Share.” A clear jar is recommended so your child can see their money increasing as they add more into the jar. (Download your own labels below!)
When your child gets their allowance (or even gifted money), sit down with them and discuss what they want to do with their money. Encourage them to put some of their money into the “Save” jar first, even if they don’t have an immediate goal. Help them understand that the money they save will be able to help them eventually, even if they don’t have a savings goal.
Next, encourage your child to put some of their allowance into the “Share” jar. This helps teach children that they are part of a larger community and encourages them to be compassionate toward others. Help your child figure out which charities they would like to donate their funds to, then schedule a day where they can give the charity the money they have saved.
The final glass jar marked “Spend” is where the rest of your child’s allowance goes, and your child can spend that money on whatever they want. If your child has a long-term goal, let them know that the more of their allowance they put in the “Save” jar, the faster they’ll be able to reach their goal.
Teach Your Kids About Money While Shopping
The next time you take your child shopping, make it a learning experience. You can start when you arrive at the store. Tell your child how much money you have to spend and what your priorities are. Once you’re in the store, show them why you are picking one item over another and explain things like discounts and coupons.
You can also give your child a small amount of money to spend themselves. You’ll be surprised at how happy they will be to spend $2 on anything they want! They’ll also learn the importance of spending with a limited budget.
Involve Your Kids in Major Purchases
If you’re thinking about where to go on vacation or buying a big-ticket item, like a new appliance, you can include your older kids in the process and let them help you with the research. Show them the factors that go into making the decision and have them help you compare the options before you make your purchase. They’ll feel proud to know they helped with the research to make the best decision for the entire family.
Teach Your Kids About Money with First Alliance Credit Union
When you teach children about financial literacy, you’re giving them an advantage that will last for their entire life. They’ll know how to set financial goals, how to set up a budget, and how to spend their money wisely.
You can also help your children put the financial literacy lessons they’ve learned into practice at First Alliance Credit Union. When you become a member, you can get your children a youth account for only five dollars and show them how to monitor their account with our online banking platform and mobile app. You can even introduce your older children to our podcast, which is filled with interesting financial information including the basics of student loans and how to achieve money goals.