How Can You Educate Your Kids about Finance?
Recent research from the National Foundation shows many Americans are struggling to understand personal finance. Nearly half of Americans gave themselves a C or lower in personal finance knowledge. This could be due to the fact that few are receiving personal finance education in school, college, or in the workplace. In fact, another study by the Investor Education Foundation found only one in five Americans received such instruction.
Since so few people are receiving a personal finance education, it is important to teach your kids these valuable life skills at home. Here are a few ways to get started:
- Show them how to create a budget. You can use your own budget, or help them create one of their own by using their allowance and any expenses for which they are responsible. While it is never too early to start educating kids about finances, this is especially important if you have a working teen who is responsible for their own car expenses.
- Teach them the importance of saving. Ask them what sort of goals they have in mind and show them how to save a portion of their income towards those goals. It is a good idea to have them create both short- and long-term savings goals.
- Explain what debts you have. It is possible your child does not understand how borrowing works, so you want to explain credit cards, mortgages, and other loans.
In addition to these conversations, consider playing financial games, such as Cashflow for Kids, Life, Monopoly, or Pay Day.
Whichever method you choose, it is never too early to start talking to your kids about money.