Financial literacy empowers families to navigate the often complex and sometimes tricky world of money. It’s about equipping your entire household with the knowledge and skills to make smart personal financial decisions. It’s not just a one-time lesson but an ongoing journey and team effort. And the earlier children learn to smartly manage finances, the better they’ll be set up for a future with good money habits.
10 Ways for Families to Teach Personal Finance
1. Budgeting Workshops
Budgeting workshops can be a fantastic way to teach the whole family about financial literacy. When you gather to talk about money, you’re not just teaching the nuts and bolts of budgeting but also instilling a sense of financial responsibility that can last a lifetime (Deenanath, Danes, and Jangc, 84).
These workshops can create a safe space for open conversations about money, allowing family members to share their financial goals, concerns, and questions. You can break down income, expenses, and savings goals in a way that everyone can understand. Teach the littlest ones the value of their piggy bank savings and give guidance for older kids on how to allocate their allowance wisely. Plus, it’s a chance to lead by example, showing kids that responsible budgeting isn’t just something adults do but instead is a skill everyone should have. So these workshops aren’t just about numbers. They’re about building a stronger, financially savvy family.
2. Set Financial Goals
Setting financial goals as a family is like plotting a treasure map to your dreams together. Sitting around the dinner table and discussing your goals – be it a new bike, car, or even dream vacation – can be an exciting way to unite everyone towards a common purpose (Rebecca Lake, 2023).
These can range from short-term goals to long-term goals, and they often come with their own set of sacrifices and strategies. Children can learn that money isn’t just about spending but also about delaying instant gratification to achieve things that really matter to them. And when you reach those milestones together, the sense of accomplishment and togetherness is priceless.
3. Savings Challenges
Savings challenges can be a fun, practical lesson in financial education. Whether it’s a “no spend week,” where you try not to spend on non-essential items, or a competition to save a certain percentage of your allowance, it makes learning about money feel real and goal-oriented.
These challenges not only teach the importance of saving but also help family members bond over a shared goal. It encourages teamwork, creative thinking, and planning, as everyone brainstorms ways to cut costs or boost their savings. It’s a hands-on lesson in how small changes can lead to big financial gains, which is a lesson that sticks.
4. Money-Making Opportunities
An effective way for children to understand finances is to have real-world opportunities to earn their own money and make decisions about their personal finances. Many families provide children with allowances or monetarily reward for additional chores around the house. This income is a great way for children to begin learning how to intentionally save or wisely spend their hard-earned dollars.
However, studies show that when children have opportunities to earn money outside of the home, it greatly increases their confidence in managing their own finances (Deenanath, Danes, and Jangc, 84). Finding ways to make money around the neighborhood, such as mowing lawns or even running a lemonade stand, makes the process of earning money real and helps cement the financial concepts you teach and model.
5. Shopping Smart
Shopping as a family is an opportunity to teach your kids some savvy money-saving skills. You can start by explaining the difference between needs and wants, which is a crucial lesson that can help kids differentiate between essentials and those tempting impulse buys.
You can turn a trip to the grocery store into a game of finding the best deals, whether it’s hunting for discounts, using coupons, or comparing prices online. It’s like a treasure hunt that teaches life skills. If you’re back-to-school shopping, give them a budget they have to stick to. They’ll learn how to make hard decisions, like whether to maximize their school supplies or potentially make sacrifices for that one pair of shoes they’re dying to show off on the first day of school.
6. Banking and Savings Accounts
Teaching children about checking and savings accounts is a vital step in building their financial literacy from a young age (Deenanath, Danes, and Jangc, 85). Starting with the basics, you can explain that checking accounts are like a wallet you keep at the bank, where you put your money but can easily access it with a debit card.
Savings accounts, on the other hand, keep your money safe and sound, and it has a bonus feature: it earns interest over time. You can set up a savings account for your child and encourage them to regularly deposit a portion of their allowance or gift money. It’s a fantastic way to teach them the value of saving for the future.
7. Emergency “Rainy-Day” Funds
Teaching children the importance of having an emergency fund is like giving them a financial safety net, and it’s a lesson that will serve them well throughout their lives. Start by helping them understand what constitutes an emergency, like medical bills, car repairs, or unexpected job loss (Fowler, 2022). And then, stress the importance of having a financial cushion for those rainy days.
Encourage them to set aside a portion of their allowance or earnings into a separate account, potentially even at a different bank. High-interest savings accounts are a great place to keep emergency funds separate from other bank accounts, so the funds are less easily accessible but also gain much better interest than a traditional savings account.
8. Investing Education
Teaching older children the basics of investing is like opening up a world of financial possibilities. Once they grasp this concept, they can see how their money can work for them, rather than just sit idly in a savings account. Start by explaining the fundamental idea that when you invest, you’re essentially putting your money into something with the hope that it will grow over time.
Additionally, you can introduce the concept of risk and return (Baker and Marquit, 2023). Let them know that while investing can potentially yield higher returns, it also comes with a level of risk. This conversation will help older children to think long-term and consider their financial future.
9. Personal Finance Resources
Family financial literacy resources come in various engaging forms that cater to different learning styles and age groups. You can start with age-appropriate books for kids that make learning about money fun and relatable. Interactive websites and mobile apps offer games and activities that turn financial education into a fun adventure.
For older family members, there are online courses, podcasts, and YouTube channels dedicated to personal finance and financial literacy. These resources cover topics ranging from budgeting and saving to investing and retirement planning. The best part is that you can explore these resources together as a family, sparking conversations and discussions about money.
10. Teach Responsible Credit Use
Teaching the importance of responsible credit use to kids and teenagers is all about showing them how to use credit wisely and avoid the pitfalls of debt. Start by explaining that a credit card isn’t a magic money source but instead that it’s essentially a loan that must be paid back.
Teach the significance of paying credit card bills on time and in full. A quick calculation of how interest adds to their bill can be an invaluable lesson. Let them know that late payments can hurt their credit score and potentially affect their ability to get loans in the future. Responsible credit use is a life skill that can protect them from unnecessary, rotating debt and empower them to leverage credit when needed and appropriate (Deenanath, Danes, and Jangc, 85).
The key is to make smart financial decisions a part of your everyday life. Whether it’s discussing budgeting over dinner, setting savings goals, or exploring financial literacy resources together, these conversations and actions teach kids and adults alike the value of responsible financial management. It’s about building a financially smart family that can weather the storms of economic ups and downs and work together to achieve your shared financial goals.
- Brian Baker, CFA & Miranda Marquit, “Investing basics for kids: How to teach children to save and invest in 2023,” Bankrate.com, June 5, 2023, https://www.bankrate.com/investing/how-to-teach-kids-about-investing/
- Deenanath, Veronica; Danes, Sharon M.; and Jangc, Juyoung. “Purposive and Unintentional Family Financial Socialization, Subjective Financial Knowledge, and Financial Behavior of High School Students.” Journal of Financial Counseling and Planning, Volume 30 (Number 1, 2019): Pages 83 – 96. https://files.eric.ed.gov/fulltext/EJ1241099.pdf
- Janet Fowler, “Why an emergency fund is more important than ever,” Investopedia.com, April 17, 2022, https://www.investopedia.com/financial-edge/0812/why-an-emergency-fund-is-important.aspx
- Rebecca Lake, “How to Build a Family Financial Plan,” Smartasset.com, May 27, 2023, https://smartasset.com/financial-advisor/family-financial-planning