We live in a world where it is unable to function within society without having and handling money. So, on that note, does your child have a good sense of financial literacy? Having an awareness of the value of money and its concepts and risks allows people to make informed decisions. And making informed decisions, especially when it’s about finance, is an important part of life and an important thing to understand whether or not your child is approaching it.
The first thing is to discuss money. When you talk about paying for things or getting paid for work, children are able to establish a basic understanding of how it all works, i.e money comes in, money goes out. So with this in mind, when they come to you and ask for things at the shops you can explain that money is not endless. The family only earns a certain amount of money and only a certain amount of that is used to purchase things. Hopefully, this will help distinguish the needs from wants.
Pocket money is a good way to introduce money to children. Doing chores in exchange for money will allow your child to see that when they work they get paid for their labour. The only way this will work properly though is if you pay for each task rather than a fixed payment for the week. This way if they want, they may offer to do extra chores in exchange for more money (smart thinking kids). They will be able to decide what they would like to purchase and how many chores they need to complete to do so.
It’s tricky to keep tags on children’s money when they get it for their birthdays, for Christmas and for other miscellaneous occasions. To avoid both yours and their confusion, why not open up their own savings account. In having their own account, they can then make their own decisions and decide how they want to manage their money. Once they see the money going up as they put more in, not only will it give them a visual of saving money but may even prompt them to add more in.
Involving your child in financial management and big money decisions can also increase their financial literacy. Show your children the bills that come in and how you deal with them. What do you put where and when?
When your children wish to purchase something, encourage them to research first. Whilst it can be fun to be impulsive, it’s also important to research prices and sellers before they go to purchase. This way they can compare the features and offers to determine what the best deal is.
Sometimes, when you research a second-hand option may come up. This is often the way that the thing they wish to purchase can be sold, in a good condition from a second-hand seller or individual. This may also be a good example to show the value of money and how it can change when purchased first to reselling.