It’s Financial Literacy Month – Are You Raising Financially Responsible Kids?

It can be a challenge to keep kids financially grounded in today’s consumerist society, where delayed gratification feels like an obsolete concept. But all hope isn’t lost. By instilling good money habits in children and giving them the opportunity to earn, save, and manage their finances while they are still living at home, they will be more likely to develop a respect for money and a financial savvy that will equip them for success.

What is Financial Literacy?

Financial literacy is defined as “the ability to use knowledge and skills to make effective and informed money management decisions.” 

What this basically means is that, when you’re financially literate, you know how to use and manage your money wisely, often in the form of savings to achieve short-term and long-term financial goals. 

Those with a better understanding of how money works are able to make educated financial decisions and eventually become adept in assessing and taking advantage of investment opportunities that benefit their financial well-being.

How to Raise Financially Responsible Children

Your children’s pre-teen and teenage years is a crucial time in preparing them for adulthood. As parents, you want to make sure that they are equipped with life skills that will help them thrive in the real world. One of the most important is financial literacy.

“Knowledge is power,” and teaching your kids about money at a young age provides them with essential knowledge and skills that will allow them to avoid pitfalls and make informed decisions regarding financial matters later on. But as financial literacy is hardly taught in schools, it is up to you – parents – to ensure that your children get the financial education they need to succeed in life.

These practices will help you get your kids on the right financial path:

1. Have open conversations about money at home.

Money is a taboo topic for most families, but it’s important for parents to be open and willing about discussing money with their children.

Demystifying money by letting your kids in on certain conversations about household finances – like how you allocate your income, fix your household budget, or save for vacations – will introduce your kids to the basics of money management and show them how a good financial plan can help them achieve their goals.

2. Let your children know what you can and can’t afford.

Kids rarely have an idea what their parents can or can’t afford unless you tell them. While it’s natural for parents to want to shield their kids from the harsh realities of life, it’s also important that they are made aware of the financial situation of the family.

When parents fail to openly discuss the family’s finances with their children, the children may form their own conclusions and expectations, which may or may not be accurate.

3. Do not be afraid to tell your kids ‘NO.

Avoid caving in to your child’s every whim. You may be doing more harm than you realize if you keep on saying “yes” just to evade the hassle.

You don’t want your children to think that it’s okay NOT to say “no” to their own desires. This may cause them to develop a mentality or a lifestyle that they may not be able to sustain in the future, leading them to turn to debt, especially credit cards.

4. Give them an allowance.

Your children won’t be able to fully grasp the concept of money management until they have some money of their own to work with. If your kids are not old enough for a job, you can give them an allowance for doing tasks outside their routine chores.

Since cashless transactions are more common nowadays, it’s crucial to expose children to cashless payment methods in addition to actual cash. The BusyKid Visa® Prepaid Spend Debit Card for kids and teens provides young people the opportunity to receive hands-on experience in managing invisible money. Plus, it makes paying an allowance much more convenient for parents!

5. Practice the Save, Spend, Give model.

The Save, Spend, Give model is an effective way to instill lifelong healthy financial habits to your children. This money management method teaches young people to allocate a set percentage of their income or allowance for saving, spending, and giving – regardless of how much they earn. The ideal distribution would be 50% for spending, 30% for saving, and 20% for giving back to charities or the community.

It’s a very simple concept that even little kids can follow and can be adjusted as they get older and their income grows.

6. Walk the talk.

You have to make sure that, as a parent, you’re practicing what you preach. This is not a call for perfection, but your words have to be consistent with your actions if you want your children to take your teachings seriously.

As important as financial education is, what your children need the most is a role model in financial responsibility; someone who will not only tell them what to do but also show them the right way how to do it.

Early Financial Education Pays Off

Over the years, multiple studies have shown that young people who lack proper financial education are more likely to face money troubles as adults. Conversely, those we were taught how to manage money as a child are less prone to making bad financial moves because of their strong financial foundation.

It’s impossible to overstate the significance of financial literacy for children. What children learn about money management in their formative and adolescent years can have a profound impact on their future financial security.

This National Financial Literacy Awareness Month, kickstart your kid’s journey towards financial literacy and independence with the BusyKid Visa® Debit card.

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