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8 Ways to Confidently Raise Financially Literate Kids

by | Dec 21, 2019 | Tips for Parents

We teach our kids a LOT of things. But one area that may slip off our radar, or zoom in and out of focus, is to raise financially literate kids. Surprisingly, how to be financially savvy is not covered in many schools, especially at the primary/elementary stage. And yet, research tells us that money habits are formed in kids as young as seven! With this in mind, it’s recommended that we start our kids fairly young in becoming aware of money and how to handle it.

As with all areas of learning, when it comes to being financially literate, we want to set our kids up to succeed. We want to avoid (as much as we can), a future where they find themselves in serious debt through a lack of knowledge and know-how. We want them to make intelligent financial decisions as adults to minimise any financial stress and potentially harmful situations.

As parents, we have this amazing window of opportunity to achieve that; while our kids are still young and listening to us! If we do it consistently, being financially literate will not only lessen or even avoid harmful situations, but also teach our kids essential life skills and develop their confidence. When my daughter physically pays for things she’s chosen with her money, I’m convinced she walks away from the cashier three inches taller!

To help you get started down the financial road or build on what you’re already doing, here are eight ways that will help you raise financially literate kids. When implementing these strategies, remember to be consistent as much as possible. Avoid giving mixed messages, such as explaining that money isn’t limitless, only to then buy them the item they wished they’d bought after all their money has gone.


 8 Ways to raise financially literate kids



1. Encourage your child not to be an impulsive spender

This is a big one. The way I approach this is to ask my daughter how much she loves the item (“do you really, LOVE it?). Then I’ll get her to think about whether it’s something she really NEEDS. Depending on her responses, I’ll encourage her to think about the item before she decides to buy it or not. This could mean waiting until all the other shopping is finished or waiting a few days.

It’s also really effective if you show them that you’re not an impulsive spender. You can do this by modelling your thought processes. You might see an item of clothing and say something like, “I love this jumper. But I bought a jumper a while back and I’m not sure I really need another one. I’ll leave it for now and see how I feel the next time we’re out shopping”. This approach also teaches them the benefits of delayed gratification and works on their impulse control.  


2. Explain the ATM


Kids can be hilarious when they think the machine in the wall is there for anybody to extract a limitless amount of cash from! Explain that your hard-earned money has been put into your bank account and it’s a finite amount!


 3. Make saving a habit

The financial experts tell us that saving is crucial and it needs to be a habit. So once your child starts to receive money, whether its pocket money or money for birthdays etc, encourage them to save a set percentage. Kids will often find this hard, as they feel the urge to splurge it all! But you can help them in two ways:

i) Give them a glass jar or a piggy bank that is clear, so they can see the money. This will enable them to watch it literally grow before their eyes. The excitement of watching its growth will help fuel their resolve to save.

ii) Show them the joy and sense of achievement that comes from having saved for something and then buying it.  


4. Ensure a physical connection with money

Most kids watch us pay for purchases with a card, both in shops and online. This can often mean they rarely see physical money being handled. But it’s important that they have a physical connection with it to help them realise that it’s real and that it’s been earned. You can achieve this by letting them purchase things with cash for example, and/or letting them see you paying with notes and coins!


5. Avoid developing a credit card mentality

We’re all aware of someone who got themselves into serious strife with a credit card or read about such a case. The consequences can be heart breaking. And banks, shops and other financial institutions don’t make this any easier, when we’re constantly offered loans for things we don’t even need, or encouraged to buy things but don’t have to pay until a future date.

We can avoid our kids becoming victim to the mindset that we can have things now even if we don’t have the money (i.e. on credit). We can do this by making sure our actions are consistent. For example, let’s consider that your child is deciding whether to buy item A or item B. They buy item B but realise the next day that they really wanted item A and they don’t have any money left. In this situation, avoid buying item A or telling them that you will loan them the money and they can pay you back once they’ve saved again.

I know it can be tempting to do this and we’ve probably all been guilty of it at some point. But if we teach them that it’s OK to spend money you haven’t got by borrowing it, we run the risk of setting them up to have a credit card/have it now regardless, mentality. And we know that in adult life this can be disastrous.


6. Money is finite

For the vast majority of us, money is finite. There’s a certain amount and when it’s gone, it’s gone. You can help your child with this by explaining budgeting in ways appropriate to their age. Show them that each month you pay for all the things you need to pay for, such as food, bills, mortgage etc. Then you put a certain amount away every month into your savings account. The money you have left is for spending on wants, not needs. You could give this pool of money a name; or maybe your child could come up with a name for it. When you buy things out of this pool of money, tell them that’s what you’re doing. So, let’s say you’ve called that money the ‘pool’. You may say something like: “If I buy that rug, it will mean I’ll only have X amount in the pool left”. Or, “If I buy Y, that will mean all the money in the pool will be spent and I may want to buy T instead”.


 Financially Literate Kids7. Provide opportunities to earn extra money

Depending on the age of your child, give them opportunities to earn extra money. Earning money in this way will give them a real sense of its value. I would suggest not paying them for the chores they already do in the house, as that’s part of working together as a family and teaches them about responsibility. If they earn extra money, I would also suggest being consistent with your approach. The extra money they’ve earned, needs to be given the same consideration as the other money they receive. Otherwise we’re at risk of giving them mixed messages.


8. Teach the importance of giving

Getting our kids into the habit of giving brings tremendous benefits. And this can be done with money as well. Decide with your child how they could give a small portion of their money to a person or organisation that would benefit from it. It doesn’t need to be on a regular basis, such as every week or every month. It’s really the act of giving that we’re focusing on. Teaching our kids financial literacy requires our time, patience and perseverance. There will be times we’ll fall off the financial wagon and that’s OK. What matters is that we note when we do and get back on. We’re our kids’ superheroes but they also know we’re not perfect. When you trip up, simply share it with them; smile and return to building a financial foundation that will be a lifetime gift.  


Related: How to Build Maths Confidence in your Child


Over to you…

Have you started raising financially literate kids? Has it gone smoothly or have there been bumps in the road? Whether you’ve already begun or are about to start, I’d love to hear about your journey in the comments below.




Hi, I’m Nicola.

I help parents to actively support their child’s education, so they can succeed in school and beyond.




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