Children, Financial Literacy, and Generosity

Too many of us grew up without being taught about finances in our families, and we all know we are not taught about finances, debt, saving, investing, retirement, financial planning, etc. in school. In order to provide our children with a better financial foundation, we must start at home and keep it going throughout their lives. The younger you can start teaching them the proper view of money - how to obtain it, how to manage it, how to use it, and how to view it - the better off they will be. So here's what you can do to get your kids started on a better financial foot than maybe you had. Always remember: this is simply a place to start so you can adapt it according to your family's values and the age of your children accordingly.

Use the Three-Jar Budget System

This system is very easy, and all you need is three jars: one for spending, one for saving, and one for giving. Everytime your child receives money, they allocate the money between three jars. You can encourage certain behaviors such as save 20% of what you receive, 20% for giving, and 60% for spending now. This is an embedded math project too! I'm personally fond of setting a high savings behavior such as 30% especially while they don't have any financial responsibilities just so they get into a really good habit well before adulthood.

Let them choose how they want to give.

There are so many ways to give so let them choose something that they care about and that speaks to their heart. My son loves snakes and would not hesitate to donate to something like, "Snakes are Friends and They're Cool - Stop Talking Bad About Them." I totally made that up, but he's always been outraged by the bad rep snakes have and is very passionate about that. That would be a campaign he can get behind. So whatever it is that moves your kid, let them run with it. It can be gift-giving, community causes, performing random acts of kindness, fundraising for a cause or contributing to a cause. It is important that they choose this for themselves because the giving will be that much more meaningful to them. Don't downplay something like, "I want all kids to have a unicorn plushy," because a thought like that could lead to unicorn plushies for children battling cancer or children whose families don't have money for toys, etc. Take their gift-giving seriously and be sure to encourage not demean how they want to use their money for others.

Make Financial Talk Normal

I don't know who decided it was appropriate to gatekeep financial tips and wisdom, but it's a bad idea. Age-appropriately, you should share your financial decisions and your own charitable giving. I'm not talking about sharing your debt, etc. (although discussing this is important as your kids get older), but simple things like how your budget is structured, what do you make sure you always have money for and why, how you go about choosing what you're going to buy at the grocery store, clothing store, shoe store, etc. (when does cheapest price versus a certain brand or quality matter), energy saving habits you have, cooking versus eating out, etc.

Set the Example

Your kids are always watching, and while we all know this theoretically, sometimes we don't realize to what extent they're watching us. I have recently started teaching my son how to drive, and I forgot to share a very necessary, but basic tip: how to properly turn the steering wheel (one hand over the other). That being said, he just did it when he came to his first turn. Right when he was starting to turn I calmly said, "I totally forgot to tell you about hand placement when you're turning, but you're doing it. How did you know to do it?" He said, "I watch you when you drive." So when you demonstrate responsible saving, spending, and generosity in your everyday life they are going to see it in action. But just remember, you need to talk to them about it and show them how to do it: not just the act, but being in a position of being able to do certain things. Yes, they watch, but they also need the how-to guide. Without it, some kids think you tap a card and money magically appears. Model the behavior, and explain it.

Make it Visual

Most people love a good, simple, effective visual especially for making progress and kids are no exception. Use charts, decorate the jars, get piggy banks, spreadsheets (if your kids are older and love a color-coded, auto-summing spreadsheet), etc. to help them SEE the value of saving and giving.

Progressive Learning

Remember to keep the financial learning progressive according to their age, maturity level, comprehension, and abilities. What you will implement for your 4-year old is not going to be the same as for your 8, 12 or 16 year old. Keep that in mind and just know that this learning and these conversations should never stop.

By teaching your children financial literacy when their young, you're not only setting them up for a better future, but you are teaching them how to be generous and happy human beings. As a wise man once said, "There is more happiness in giving than receiving."