Midday Fix: Teaching your kids financial literacy before they head off to college

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Richard Chew

http://www.1stcig.com

10 Tips on How to Teach Financial Literacy to Your Kids Before College

1) Have a conversation with your kid(s).

Talk to your children about money. It sounds simple, but this is the most effective way to help your children understand personal finance. Explain how you arrive at financial decisions, what’s in your budget (or if you don’t have one, why not do one together?) and how different aspects of dealing with money make you feel.

2) Don’t forgot about physical cash.

Show younger children the coins and notes you have in your purse or wallet and ask them to help you count them. Talk about the different sizes, colors and numbers and the total coins altogether. Discuss foreign currency as part of the global economy we live in.

 3) Explain how money is earned (your work lifestyle is important!)

Talk about where money comes from. We are an increasingly cashless society, and thanks to the invention of cashback it’s easy for children to assume that the supermarket is the source of all of your funds. Showing your child your pay slip and explaining what you did to find employment are good ways of building financial understanding. For older children you can highlight the deductions taken from the gross pay and discuss what they might be used for.

 4) Explore the difference between need and want.

For our children to have the lifestyle they want as they mature, we need to explain the difference between needs and wants. Contrast examples of goods they need every day, such as food and clothing, and items such as toys they might want but don’t actually need. This is a great way of introducing the concept of saving and the need to exercise restraint in their spending, as well as helping them to understand that sometimes you won’t be able to afford everything you want.

 5) Set savings challenges.

If you give your child pocket money or an allowance, talk to them about setting a savings target and encourage them to adopt good habits early. This is a good opportunity to introduce ideas around keeping your money safe and planning for the future. That lifestyle they want is right around the corner.

 6) Involve them in the weekly shop.

As you go around the supermarket, ask your children to choose the best-value combinations of set products and get them to do the adding up as you go from aisle to aisle. As well as learning valuable lessons, your new helpers can make your job easier at the same time.

 7) Talk about different ways to pay.

Talk about the different ways of paying for things – from cash and traditional debit or credit cards, to paying with contactless cards or even using your mobile phone. Have they seen any of these in action? Talk about some of the pros and cons of payment methods – using a contactless card is quick and easy, but there’s a limit to how much can be spent in one transaction.

 8) Highlight the importance of security.

Highlight the importance of keeping our personal details safe and secure, and not to share the passwords or PINs we use with others. If we think a password or PIN has been compromised, then we should change it as soon as possible.

 9) Involve them in big spending decisions.

Involve them in appropriate spending decisions, such as buying a new computer or a kitchen appliance. Making real life spending and saving decisions about even small amounts of money can help children to understand more about managing their money which is a key component to their financial lifestyle.

 10) Show them the cost of running a home (This is a big one, especially during Covid!) Look at utility bills together to explore the costs of running a home. Can they help to manage the household budget? See if they can find any savings that could be made. They will get a kick out of being in the family financial lifestyle mix with you on this one.

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