Financial literacy is the ability to understand and practise financial skills such as budgeting, taxation, investing and financial management. Financial literacy is a key part of having a healthy relationship with money, which is why it’s one of the main things you should teach your child. Unfortunately, kids don’t get a lot of experience with dealing with money during their time at school, so if you want them to have strong financial skills when they’re older, you need to make financial literacy a key topic at home. Here’s how you can do this.
Open a savings account
Once your child is a bit older, they’ll be responsible enough to have their own savings account. Having this account will enable them to learn how to save the cash they receive as pocket money or for their birthdays. For example, if they really want to buy something, they’ll learn how to set aside the money they receive until they can finally make a purchase, which teaches them the key values of responsibility and patience.
If you also want to save money on your child’s behalf, you can open a junior ISA. This type of savings account is managed by you until your child turns 18, which is when the money and the account are transferred to them. You can save up to £9,000 per year with a Junior ISA, allowing you to save a significant amount of money for your child’s future.
Give them pocket money
You may feel uneasy about giving your child pocket money if you’re worried they’ll spend it all on sweets, but giving pocket money can actually be a fantastic way to teach them about financial literacy. If your child wants to buy something, they’ll have to save up their pocket money in order to buy it, which teaches them the value of money and how to save.
Take them shopping
Taking your child shopping with you is another great way to teach them financial literacy. Throughout the shopping trip, you can explain to your child what your budget is and talk through the decisions you make whilst shopping. This will help them understand how to make smart financial decisions when they’re older, which is an important life skill.
Play games involving money
However, one issue you may encounter is that teaching your child financial literacy could be difficult if they find it very boring. For example, you may decide to take your child shopping with you so you can teach them about shopping budgets, but if they find this boring, they may not retain the information that well.
This is why playing games involving money could be a great alternative. Games like Monopoly are both fun and also great at teaching children about money, as they’ll have to negotiate, plan ahead and use their maths skills.
Teaching your child financial literacy is extremely important for ensuring that they have the necessary financial skills once they become an adult. If you’re struggling to teach your child about money, try out one of the ideas in this article to see how your child’s understanding of finances can improve.
