Money Plan: Financial Literacy for Kids
As a parent, you want what's best for your child, you want them to have a future that is secure and free of unnecessary difficulties, yet plenty of parents are not teaching their children about personal finances. Often adults believe that children will learn about money once they get older and enter into the real world, but waiting to teach your children about finances only stalls the progress they could make when building wealth. If we want our kids to be successful in the game of money, we must teach them about wealth building at a young age.
If you have children in your life, you should be talking to them about money. Children are very receptive and will learn lessons about money whether you are the one that teaches them or not. Ensure that your child is learning financial values that are beneficial and effective; give them the gift of financial literacy from an early age. Saving money is a great habit, but if you want your kids to learn how to build wealth, teach them about investing.
You cannot expect your child to understand finances immediately; there will be a learning curve, just like with anything new. The key to helping your child understand is to conceptualize financial terms and make the information relatable to their interests. Years ago, when I was taking on the challenge of teaching my kids about money, the beginning conversions were not successful. My lessons only started to gain traction when I introduced spending, saving, and investing in a practical and digestible way.
When my daughter was 8 years old, I tried unsuccessfully to teach her about investments until I took her to McDonald's one day. My goal was to simplify investing and help her understand why it was relevant to her as an 8-year-old. During this trip, we just sat in the parking lot and observed the customers coming in and out. We started by acknowledging that everyone coming in and out was spending money and getting food in return. Then I made the spending relevant to her with the idea that she could receive a part or percentage of the money that McDonald's was making from its customers, also known as investing. As I began to explain concepts of investing, ownership, and stocks, I noticed a light bulb go off in her head. Afterwards, with some money from her allowance, we purchased fractional shares of McDonald's in her name. With the experience, her desire to buy more stocks grew when she realized she could use the money she earned, invest it in other companies she was interested in, such as Disney.
How can parents teach financial wisdom to their own children in a practical way that will benefit them for their whole lives? You can do this by getting on your child's level, relating money to things they are interested in or already have an understanding of. Introducing kids to finances is not about money; it’s about providing them with experiences that help them understand and become comfortable with financial decisions. The education system does not teach our kids about personal finances. As their parents or grandparents, we have to be the ones who break it down for them.
Kids first start to develop their wealth in their minds, and a strong money mindset will enable them to be financially savvy young adults who maximize their opportunities and build wealth. When it comes to money, what you don't know will hurt you. Building generational wealth means making sure the next generation is financially literate, understands wealth-building strategies, and can make smart, effective financial decisions.
