Empowering Future Generations
Help Children Become Money Management Superheroes
Growing up as a first-generation Latina, the conversations at home were many but financial education was never one of them.
From a young age I would help translate things for some family members for anything from documents that needed to be filled out to customer service calls that needed to be made. There was never a conversation however about what a 401(k) was or how investing from an early age could set you up for financial success. How can anyone in my family teach me something they never learned themselves? They came here from the Dominican Republic, and they definitely did not have financial education conversations growing up there.
So here we are. I am still trying to wrap my head around financial lessons and as I learn, so will my children. According to Next Gen Personal Finance (NGPF), in 2020 there were 8 states that guaranteed a personal finance class for high school students. In 2024 there are now 25 states that will be offering a personal finance class to high school students. Don’t even get me started on why ALL states are not ensuring a financial education to our kids, but we won’t go there. I personally would not depend on the schools to teach my kids about money management. I plan on just teaching them whatever I learn along the way.
Financial lessons can be taught at a very young age. You can teach young children how to sort coins and bills, so they learn how to identify it early. You can also create a pretend store or a pretend restaurant in your living room. Put price tags on items in your home and give your little ones pretend money that they can use to purchase the items. This also introduces the concept of add and subtract when you give them change back for their purchase.
You can give slightly older children a small allowance and teach them how to budget their money. Show them how to categorize their money to include spending, saving and sharing. When spending they can learn about needs versus wants and to keep that in mind when managing their money. Give everyday examples and let them decide whether it is a need or a want. Younger children can save their money in a piggy bank or a clear jar where they can visibly see their money growing. Open up a bank account with older children where they can learn online banking and concepts like interest and fees. The lesson of sharing is also an important financial lesson. Giving to others helps build character and compassion in our children. It does not even have to be monetary. It can be as simple as donating clothes or toys to less fortunate children or even acts of kindness is sharing. They can learn to let go of material possessions and give to people in need. When giving to others, there is a sense of happiness that comes with it. Make sure to celebrate their kindness.
Introduce the concept of goal setting to our children. Show them the difference between a short-term goal and a long-term goal. A short-term goal could be a toy or some electronic device that they may want. An example of a long-term goal could include saving for their first car. Whatever the goal may be, we can teach them that it can be attainable with some financial planning.
Budgeting is another concept that is an important lesson for money management. This can be taught with play money or even interactive online games. They can learn about the money that comes in versus the money that goes out, income versus expenses. Make sure to show them how to track and review their budget regularly. Make sure to adjust when needed because life is unpredictable. When a new want comes up, have them review their budget and decide if that want is worth it. You can involve the whole family in the lesson. If you are planning a family trip, maybe include your children in your budget planning. They can even contribute to the budget if possible. This can be something as easy as skipping on a toy purchase, so that the money saved will be added to the family trip budget.
Teaching money management at a young age helps kids think more critically and make more informed choices when dealing with money. These good habits create a strong foundation that will be carried over to adulthood. Financial knowledge that is gained as a child will set them up for financial success in the future. By the time they get to the real world and need to start making their own decisions they will be financial management superheroes!
I will leave you with some actionable strategies to help you when teaching children financial education.
Budgeting: You can give children a small allowance and teach them to categorize it into spending, saving and sharing. You can create a chart where they can track their progress or open a bank account with older kids where they will track it through online banking.
Stories: Read them stories that have characters learning financial concepts. You can use storytelling as a tool for teaching in a relatable, engaging way.
Games: Play games that incorporate money lessons in them. Monopoly is a game everyone may know about, but I purchased ‘The Entrepreneur Game’ from Amazon. It is probably better for older kids, but it teaches lessons in investment, marketing, branding, negotiating, communicating and decision-making. I even learned a few things playing this game.
Real-life Experiences: Involve children in a trip to the grocery store. Start by planning with a list of items and a budget in mind. When at the grocery store let them help you find the items. Show them price comparison and the differences between brands and their quality. Sometimes it is better to get the store brand, but at times the quality is not there, and you end up purchasing more of it.
Sharing/Giving-back: Encourage children to give to someone in need. It can be monetary, or they can donate their material possessions. They can also give with acts of kindness.
Creating good financial habits early on establishes financial literacy skills that they will carry to adulthood. They will have a positive money mindset shaping their beliefs about money. If you read my blog about money mindset, you know that a positive mindset is important. If you have not, click on the following link to help guide you to a positive money mindset Financial Roadblocks: Overcoming Limiting Beliefs.
Children will establish accountability of their financial choices and understand the consequences of their actions. It empowers them to become financially independent and build financial confidence.