April is Financial Literacy Month. With just a little bit of prompting and information you can help your kids grow a curiosity about almost anything... including money.
Start the Conversation...
It's easier than you might think. Use a common life activity to begin sharing financial concepts. Consider a car wash. When our kids were young, we were at a local hand car wash. We asked the kids to think about how much money the owner might make. We talked to our kids about how much we paid ($35) for the wash. Then, asked them to look at the number of cars possibly washed per day. Then, looked at the number of days the car wash was open. And then used $35 as the average cost of a wash. We had the kids (calculator ready) calculate the number of cars washed per day times the cost per car ($35). Then, asked them to multiply the number of days the car wash was open. A simple enough conversation and calculation to fuel their curiosity.
If your kids are ready for it...
You can educate your kids about costs or expenses for a business as well. Just another way to increase their financial literacy. Using the car wash example, consider the cost of the soap, sponges, employees, etc. Then have your kids subtract this estimate of "expenses" from the "income" generated by washing the cars. Repeat the "conversation starter"--while on vacation or running weekend errands. Simply use another example or business but the same variables as we did with the car wash. Perhaps a kayak business or a zip-lining business, surf-boarding business, you got this.
Introduce the concept of money early.
So often, parents think talking about money with their kids may be too overwhelming. Sure, you probably don’t want to tell your 6-year-old all of the details about your mortgage and down-payment. But, consider sharing and educating on "what things cost". For instance, at age 7, our son was interested in the riding lawn mowers at the local hardware store. We couldn't get past them without him jumping on and staying there for a while. By the time he was 9, we began to show him the price tags and the different features and benefits of the mowers. He began to see that the more features and benefits, the higher the price. He also began to learn what something like a mower could cost. Then, one day he noticed that “special” thing called “On Sale”. He learned that from time to time, with patience, you just might happen upon a sale. As he learned more about something he aspired to have, including the cost, he began to try to figure out how he could buy it. We would say, "save up your money". By age 10 he started a lawn service for our neighbors where he would mow, edge, and water for them while they were on vacation during the summer for a set fee. He learned how to save and how to earn.
A simple savings account is a great way to educate about the compounding of interest.
A few years back, we began reviewing the savings account statement with our son. We heard him say, “Wow, I earned .08 cents this month!” With eyes wide, my son learned quickly about earning interest on his money and was excited about it. We began reviewing the monthly account statements together regularly. As we reviewed the interest earned, our son noticed that even if he didn't make a deposit, the amount in his account increased. He learned about the compounding of interest ---one of the core components to financial literacy!
Financial Literacy can help support your childs' various life goals. Start the conversation today!
For more on Kids and Financial Literacy check out NPR.com - How to talk about money as a family.
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