Teach Kids Financial Literacy

Who Will Teach Kids Financial Literacy?

According to the T. Rowe Price 7th Annual Parents, Kids, & Money Survey from March 2015, 80% of parents don’t think schools are doing enough to teach kids financial literacy.

That means that parents are going to have to teach kids about personal finance and how to manage money. So far kids don’t think parents are great teachers. “Less than half of kids (46%) say their parents are doing very or extremely well at teaching them about money and finances” (Parents, Kids, & Money Survey, T.Rowe Price, Mar 2015).

Parents Setting a Good Example is One Way to Teach Kids Financial Literacy

bad attitude girl sitting at desk
Do you want your kid to act like this?

You may not realize it, but you’re teaching your kids financial literacy by how you manage your money as a parent. Unfortunately, “40% of kids feel their parents use the “do as I say, not as I do” mentality when teaching them” (Parents, Kids, & Money Survey, T.Rowe Price, Mar 2015). Consider this short list and think about what you are teaching your kids about personal finance by the example that you set.

💳 Do you use cash or do use swipe the plastic card for everything you purchase?

📈 Do you follow a budget or do you complain about not having enough money?

👨‍👩‍👧‍👦 Do you discuss purchasing decisions with your kids and include variables such as quality and opportunity cost.

💰= 👮+👩‍🚒+🧑‍🏫 Do you complain about paying taxes?  Or do you explain how taxes pay for public services such as police, fire fighters, and teachers?

🛍 Do you buy things on impulse?  How do your kids determine if a desire to buy something is a want or a need?

How Your Example Affects Kid’s Money Management Skill

good attitude girl sitting at desk

That’s just a few examples above. Now let’s review the consequences of a parent’s example.

💵 If you use cash, then your kids see money physically being exchanged for goods and services. Swiping a card is like waving a magic wand. Younger kids won’t make the connection. They could have a more difficult time understanding the value of money. For more on this specific topic, you can read “Avoid This Financial Mistake When Teaching Kids About Spending Money.”

📄 If you use a budget to plan your spending and maintain an emergency fund, then your kids will see how you follow a plan to manage money wisely. The alternative is to run out of money before the next payday. Then do without things that are needed or go into debt. 62% of parents do not regularly contribute to or maintain an emergency fund” (Parents, Kids, & Money Survey, T.Rowe Price, Mar 2015).

📖 If you discuss purchasing decisions with your kids, then they learn how to use reason when managing money. For example, would you rather spend that $5 on candy that will give you 5–10 minutes of joy or save it to go towards a $15 book that will give you days of joy?

🏷 If you explain that taxes pay for goods and services needed by the community and that the money comes from sales tax on what you buy and income tax from what you earn, then your kids will appreciate that it’s important to plan for taxes as part of your bill and part of your salary.

💎 Finally, if you make impulse buys without thinking through the cost and the impact on your budget, then how can you keep your kids from asking for every little thing they want and possibly throwing a tantrum when they don’t get it?

Setting the example is HOW you start teaching your kid financial literacy.

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Author: Daddy401k

The Dad of Daddy401k is John Q. Miller. John is a Ramsey Solutions Master Financial Coach and earned a Certificate in Financial Planning from Florida State University. Daddy401k is what his daughters called the financial literacy for kids program he and his wife created to teach them how to manage money, avoid debt, and start investing early for their financial freedom. John’s and his wife’s personal finance coaching of their daughters resulted in two young women who are college graduates, employed, debt free, living on a budget with an emergency fund, and already investing in their retirements.

26 thoughts on “Teach Kids Financial Literacy”

  1. this is a seriously fabulous post.
    teaching kids financial literacy is key in living a budget friendly life.
    the examples are fantastic.
    thanks for sharing your knowledge.

  2. My dad used a credit card only when he had to, and I think that was a valuable lesson for me on how to stay out of debt. Thanks for the tips.

  3. This is so important and thought provoking. We have been discussing this about our 4 year old. We have just opened a bank account and started pocket money this week as part of the process. The use of contactless payments now and online shopping means kids just think you choose something on your phone and it turns up with no concept of cost

    1. Thanks for considering my point of view. We used cash until our kids understood that when you buy something, you exchange money for it. After they mastered that concept and got a little older, debit cards were fine.

  4. LOVE this! My hubby works in finance… and we are always teaching the kids about money! but many parents don’t.

  5. Great article! We swipe plastic for everything, but are very disciplined with doing so. Our reason is to take advantage of the cash back perk offered by our bank. Also, it’s fun to sit down with your child and fill out a monthly budget! They get a good idea of how important it is to properly manage money when their pretend budget shows them $5,000 in debt for the month! 🤣

  6. Thanks for this post and it is best to educate children on financial aspects right from the beginning. This would instill gratitude and integrity in the things they would do in the future!

  7. This is something we are focusing heavily on with our Jr. High aged kids. My parents didn’t teach me anything about finances. It was kind of a taboo topic growing up. I wound up in a lot of debt in early adulthood. We discuss everything with our kids now. Great article!

    1. Thanks, Carrie. You sound a lot like us. It does make a difference for parents to teach kids about money. Most don’t learn it in school, so it’s up to us.

  8. I love this post.
    I was fortunate to grow up in an environment where my parents made sure I understood the principles of budgeting and saving. I didn’t realize how fortunate I was until I went to college and saw so many people lacking the even the most basic understanding of how things like credit card interest works.

    1. You’re right. Unfortunately, most kids don’t learn about personal finance from school or their parents and have to learn things the hard way. This often results in debt and bad money habits which can take years to unwind.

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