As you know, money touches everything in our world — from eating, shopping, and traveling to buying a house, getting married and having children. Every single day, we are all faced with financial decisions, and they begin early in life. As soon as a child earns an allowance or gets $10 from grandma for their birthday, those financial decisions begin to accumulate. But teaching kids about money is far more complicated than just telling them to save that money until they have enough to buy the toy they want.
Money and finance are all about numbers. There’s simply no way to become financially fit and reach financial freedom if you aren’t comfortable working with numbers. And I’m not talking about advanced calculus here—nearly every financial decision you need to make in life comes down to basic addition, subtraction, multiplication and division.
Even more disturbing is the realization that even if a child happens to be a mathematical genius and moves into advanced classes, their academic success doesn’t necessarily translate into financial literacy—once that child turns into a young adult, and is out of school and working professionally, he or she can easily be headed down a slippery slope of mismanaging money. Why? Because their education failed to teach them fundamental lessons about money and didn’t provide any real-world applications so they could practice.
The truth is, your child’s financial education is only going to come from one of two places: either learning from their own mistakes (which can range from costly to devastating, depending on the lesson) or learning from you. Isn’t it in your best interest to take a proactive approach to helping your kids navigate the financial waters, so you set them up for a successful future (and don’t become a financial burden on you or our society later in life)? Since our school systems aren’t giving your kids the financial education they need, it’s up to you to take on this responsibility. And the earlier you start, the better.
The best way to begin teaching money management to kids is by helping them understand the concept of cash flow—money coming in, money going out, and the remaining money at the end of a specific time period (usually a month, quarter or year). Teaching children the relationship between earning, spending and saving will help them understand the value of money. And you’ll definitely want to do this long before they turn 18 and are inundated with enticing credit card offers as they head off to college.
