April is National Financial Literacy Month: Explaining want vs. need and financial literacy to kids

National Financial Literacy Month recognizes the importance of teaching students healthy financial habits. In the US, National Financial Literacy Month is celebrated each April in an effort to highlight the importance of financial literacy, as well as to teach citizens of all ages how to establish and maintain healthy financial habits.

Why Teaching Financial Literacy to Kids is Important

Financial literacy for kids is about ensuring that your child is well educated on the best (and worst!) way to manage his or her finances. By encouraging financial literacy parents are securing their child’s future, ensuring they are able to both spend and save wisely..

GlobalMoneyWeek.com cites five important reasons to begin teaching financial literacy to your kids right now. They include: Budgeting Skills, Saving Habits, Financial Dependency on Parents, Economic Benefits and Social Responsibility, and Effects of Lack of Financial Literacy.

How to Teach Kids Financial Literacy

Even the youngest children will benefit from an age-appropriate discussion about earning and managing money. Of course, this is an ongoing conversation. And, the key is to tailor the lesson to the age of the child, moving on to more complex money issues as the child matures.

Not only is learning about money a crucial life skill, it’s also a relevant way to expand math skills!

Monopoly money

Understanding exactly what money is (and where it comes from) is the first step. The following conversation actually occurred between a business associate of mine and her daughter, when the child was about six years old:

Mom: “I’m sorry honey, we don’t have the money for that today.”

Daughter: “Why don’t you just go to the money store and get some more?”

Once she was done chuckling over her daughter’s description of the local bank, this working mom had to think quickly. Did her daughter truly not understand where money comes from? Or how you earn it?

The fact is, although it seems intuitive, most very small children have no real idea of how money is earned. Offering an allowance for weekly chores is one easy way to instantly explain the concept (and get the trash to the curb each Tuesday!).

Educator’s Note: This is a perfect opportunity to teach coin and bill recognition and values, counting money, and even the lost art of making change. Counting money of one denomination requires basic math skills learned in primary grades, and then being able to add different coins and bills together comes next.

But, I need it, mom!

Of course, once the piggy bank begins to fill up, your child is ready for the next lesson: Need versus Want. We need to pay the mortgage. We want to go to the movies. This lesson often takes quite some time to get across.

For older children, budgeting in order to afford some of those “wants” is a timely lesson which coincides with the covetous phase so prevalent during the pre-teen and teen years. Creating a list of expenses (insurance premiums, car payments, utility bills) and comparing it against household income is a real eye opener for most kids. Who knew that the cable bill was so high or that cell phone services cost that much?  And that dreaded oil bill! Sometimes it’s a wake-up call for parents, too!

Educator’s Note: Learning to create a proper budget uses critical math skills such as the ability to compute using fractions, decimals, and percents, the difference between positive and negative integers, and timelines. It also answers the age-old question, “But when will we use math in real life?”

Future Shock

A classic quote comes from the hit show Friends. Upon opening her first paycheck, a bewildered Rachel wails, “Who’s FICA? And why does he get all my money?”

Many teens with part-time jobs may have the same reaction without a little advance preparation. Today’s teens have significantly more disposable income than in previous years and they should become intimately acquainted with the financial concepts of saving and goal-setting.

The object of your teen’s desire – new boots, concert tickets, a car – can all be achieved with regular deposits to a “Wish Fund.” Savvy parents may want to contribute as well, in order to encourage saving.

Teens will also need to learn the difference between a scholarship, a grant and a student loan, the impact of a high/low credit score, and the beauty of compound interest.

Educator’s Note: Creating amortization schedules, learning to reconcile a bank statement, and even crafting income projections are all exceptional business skills. Learning to complete these tasks may even spark an interest in a career in accounting or business management!

By teaching children from a young age onward about money management, they will be better prepared for a lifetime of financial success!

Academic help is just around the corner. About Back to Basics Learning Dynamics

Back to Basics Learning Dynamics, Inc. provides over 125 wide-ranging educational and related services including 1-on-1 tutoring in over 60 subjects, translating and interpreting in over 20 languages, speech and occupational therapists, behavior and reading specialists, paraprofessionals, ELL and computer lab teachers, RTI support and homebound services, psycho-educational testing, 1-on-1 test prep for the SAT, PSAT, SAT II, ACT, GRE, PRAXIS, GED, and HSEE, professional development, summer school, original credit and credit recovery.And, Back to Basics operates Delaware’s only Department of Education-approved, 1-on-1 K-12 Private School in Wilmington, Delaware.

We serve the diverse needs of a range of students – from those who simply need some academic support, to those who are learning disabled, hearing or visually impaired, ADHD, gifted, or on the Autism Spectrum including High Functioning Autistic and Aspergers.

To learn more about these, and many more educational services in Delaware and the tri-state area, please call us at 302-594-0754.

Photo by ddpavumba and FreeDigitalPhotos.net.

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