There are many ways to teach your kids about money. You can purchase educational books and games and you can show them the basics of money management such as opening a bank account or balancing a check book. However, some parents have decided to let their kids learn about money through trial and error. These parents strongly believe the school of hard knocks is a better teacher when it comes to financial literacy.
A recent survey by T. Rowe Price focusing on parents of children between the ages of 8 and 14 found that some parents want their children to learn about money by making mistakes. However, these parents are not providing support by having effective conversations about money management with their children. Although the parents in this survey advocate the tough-love approach, they also say personal finance education in schools is important. Roughly three-quarters of the respondents agree that there should be a personal finance requirement for high school graduation.
“Parents need to put aside any reluctance to discuss money matters and find a balance between providing firsthand experiences for kids and talking about finances. While there is value in letting kids learn from mistakes, parents should also regularly discuss money, provide context and guidance, and use the real-life experiences to reinforce money conversations,” said T. Rowe Price Senior Financial Planner Stuart Ritter in a statement.
If you’re at a loss for how to approach financial literacy with your children, here are three steps you can take to educate them.
1. Consider enrolling your children in a money camp
There are several money camps and workshops around the United States that are focused on educating children in a social environment. Involving other children within the same age group will provide a fun and supportive environment. One top money camp for children is Camp Millionaire, which teaches children between the ages of 10 and 14 the basics of wealth building.
2. Introduce educational books and games
The books you choose don’t have to be long or full of financial jargon. Some book publishers and financial literacy organizations have developed a line of financial comic books for children. There are also educational video games that make learning about money a fun, interactive experience. If you communicate the fact that financial education can be fun, you will be more likely to engage your children and leave them wanting to learn more.
3. Model good financial habits
Another way to impart financial knowledge is to model positive money management behaviors. When you are out shopping, demonstrate self-restraint by not grabbing a pair of shoes in every color or an expense new tech tool that you really don’t need. Show your children how to separate needs from wants. Take your children grocery shopping and demonstrate techniques for saving money. Have them help you look for coupons or compare prices among circulars from local grocery stores.