Now that the kids are back in school mode, it’s an excellent time to introduce some real-world lessons about money management. Financial literacy is a topic that isn’t covered much in the classroom, and many adults find it difficult to explain money issues in a way that youngsters can understand. However, kids can generally pick up the basic concepts. Planning these exercises for after school or weekend activities keeps their critical thinking skills sharp. Especially now, when most financial transactions take place through a screen, it’s more important than ever that kids understand the value of a dollar. Here are six fun ways to teach your kids financial literacy.
1. Set Up a Lemonade Stand
Lemonade stands have stood the test of time for a reason—they’re an invaluable tool for kids to practice their entrepreneurial skills and learn about the value of money. Before they set up shop, dole out a few dollars to spend on supplies and advertising/marketing. Suggest ways to keep expenses down (such as visiting the dollar store for supplies like chalk and signs, and making a homemade recipe) and explain that the lower the expense, the more cash their enterprise will earn. Let them handle the money, which also offers a great real-life example of math skills. Running a lemonade stand requires patience and hard work—but kids will learn that if they practice those values, they will be able to earn money.
2. Use Physical Tools for Savings
Handing out an allowance is a major first step to teach yours kids financial literacy. Since most parents tie allowance to completed chores, take the chore routine outside and show kids how they can earn money for tasks such as watering the garden, cleaning up outdoor toys, and washing the car. When you distribute their earnings, provide them with two clear jars—with instructions to use one jar for spending money and one for saving. This introduces them to the basics of budgeting.
3. Take Them Shopping With Their Own Money
Kids need to understand that everything costs money and that decisions must be made for wants versus needs. The key is to make the process as visual as possible. When they want to buy something, help them count out money from their spending jar. At the store, explain how much the desired item costs and whether or not they have enough funds available to afford it. If they don’t have enough money, they will have to consider whether to dip into their savings—which also forces them to prioritize what they really want.
4. Play Money Games
Introducing money into your children’s gameplay is another way to help them practice their financial savvy. One idea is to assemble a “store,” including toys or stuffed animals, and label each item with a price tag (under a dollar). Provide them with a bowl of coins in different denominations, and encourage them to count out the coins to the correct amount for their “purchases.” The younger the child, the smaller the price tag (and pennies are easiest to use). For older kids, you can play board games such as Life, Monopoly, and the Allowance Game.
5. Involve Them in Financial Decisions
The best way to raise kids to use money responsibly? Set a good example. If they question why you can’t afford to make a large purchase, peel back the curtain of how adulthood works—showing them your own budget, or a printout of your monthly expenses for mortgage or rent, car, food, insurance, and so on. If you do happen to splurge on an item, explain how other sacrifices were made in order to allow you to do so.
6. Make Saving a Team Effort
Introduce your kids to the reality of paying bills and economizing. Choose one of your monthly bills, such as electricity, water, or phone, and challenge your kids to come up with ways to reduce it. For example, encourage them to use less water or to turn off the lights each time they exit a room. Review some of the bills with them and explain how certain practices add up to higher charges. You can also turn the savings into a competition. If they manage to shave some dollars off the bill in the following month, let them come up with a reward to spend the savings on.
It takes time to teach your kids financial literacy, it won’t happen overnight. But by devoting a small part of your days with these fun exercises, you will be setting the groundwork for their futures as responsible adults.