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How to Cultivate Financial Literacy in Your Family

How to Cultivate Financial Literacy in Your Family

AngelaRoberts

Written by Angela Roberts

Apr 20, 2022

As far as I’m concerned, family matters and money matters go hand-in-hand. Cultivating financial literacy in my family helps protect my children as well as my own financial legacy, and it’s something I can do now that I know will pay dividends for years to come. It’s a simple equation: The more my family knows about money management, the better their financial decisions can be down the road.

So how does someone educate their family about personal finance? Here are nine ideas for how to teach financial literacy to your children.

1. Start Now.

The Child Mind Institute suggests talking to children about money as early as the second or third grade because that’s when they’re typically able to grasp math basics.

According to research from the University of Kansas, children as young as five are “developmentally capable” of learning about saving and spending. Consider starting them out with a piggy bank or weekly allowance of small change.

The same research from the University of Kansas found that children who grow up with a savings account are more likely to hold “diverse asset portfolios and to accumulate more savings as young adults.”

2. Talk Regularly About Money.

A one-time chat about money won’t do the trick. Instead, try to make financial literacy part of everyday conversations.

“One way to do this is by including your children in basic financial decisions,” the Child Mind Institute says. “For example, at the supermarket, you can look…to see what’s on sale before deciding what to make for dinner. Or you can ask them to make budget-based decisions like they can have one pair of more expensive shoes or two pairs of cheaper ones because you have only budgeted so much for shoes.”

3. Be a Role Model.

Kids typically mimic the behavior of their parents or guardians. Therefore, if you want to raise financially literate children, you must also embrace good financial habits. You can do this by, for instance, creating and sticking to a budget, avoiding high-interest debt, saving money for retirement, and other practices.

4. Consider Giving an Allowance.

Providing your children with allowance money can help them learn the basics about saving and spending money.

According to Scholastic.com, many parents start giving an allowance when a child is five or six years old. One expert recommends that the weekly allowance be 50¢ to $1 for every year of age. For example, a five-year-old would receive $2.50 to $5 a week.

Personal financial professionals recommend that allowance money go into a savings account in the child’s name once the child is old enough. Otherwise, the allowance can be kept in a piggy bank or in your own account. From there, you can work together to decide what the money should be spent on. This transition is an excellent opportunity to talk about the responsibilities of managing your own accounts!

5. Encourage Working for Money.

Whether it’s doing household chores or getting an after-school job, children should be encouraged to earn some of their own money, the American Institute of CPAs advises.

“Once they do, talk to them about possible ways to use their earnings, whether it’s for an immediate goal such as a toy or trip to the ice cream store or a longer-term target, such as a cellphone,” the Institute says.

6. Aim for Progress, Not Perfection.

Just like adults, kids are bound to make mistakes with their money. The important thing is that kids and adults learn from those mistakes.

“Listening and providing guidance to your teenager [or young child] can provide a safety net, so that he or she can learn from experiences and mistakes,” says the Consumer Financial Protection Bureau.

Sometimes the best teacher is simple trial and error.

7. Concentrate on Family Values.

Talking about money should include your family’s views on the best ways to spend it, the American Institute of CPAs says.

“Explain to them that saving is important to you because, for example, it helped you pay for your college education or buy your home. If you strive to live on a budget and without debt, talk generally about how spending only what you earn helps you worry less and enjoy your money. If you make charitable contributions, tell your children about why those causes are important to you and why giving is meaningful,” the Institute says.

The Institute continues, “Even if a child isn’t ready for facts and figures, he or she can understand the decisions you make and the impact they have.”

8. Discuss the Benefits of Leaving a Legacy.

It’s hard for some kids to think beyond today. But at some point, they’ll learn about the benefits of leaving a legacy. Part of that discussion can involve what the child’s financial footprint might look like.

For example, suppose you plan to leave a legacy in the form of physical gold or a precious metals IRA. In that case, you might want to tell your children about the advantages of owning gold and your motivations for owning it in the first place. This might encourage your heirs to do the same—use gold to diversify their portfolios.

9. Never Stop Learning.

Lastly, maintain a learner’s mindset and encourage your family members to do the same. The Consumer Financial Protection Bureau is a great place to start learning, with resources for parents and caregivers aimed at helping grow children’s money skills and habits. Check out U.S. Money Reserve’s extensive video library and resource library, too. There’s something there for every generation!

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