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Sonoma Family Life Magazine

7 Tips for Raising a Financially Literate Child

By Gregg Murset

In school, most kids learn algebra, calculus, and trigonometry but not how to budget, save, or invest. The older we get, the more our responsibilities make it challenging to focus on learning financial principles, which is why it is important to start teaching kids healthy money habits at a young age. Here are a seven ways to do just that.

Learn to earn. Kids are addicted to OPM—other people’s money. They need to learn that money has to be earned. Chores are a great way to introduce kids to the “earning it” mentality. You can give kids as young as five chores or tasks to do around the house, assigning a dollar amount for each task. 

Spread the dough. Setting boundaries with kids and letting them know they can’t just squander what they earn on candy and knick-knacks can help them learn healthy spending habits. Any money kids make should be broken up into three categories: spend, save, and invest/donate. After you and your kids have decided how much will be spent, saved, and invested/donated, stand firm and don’t let kids go beyond those established limits, even when they are begging or crying for the latest toy or video game. 

Save for rainy days. Saving doesn’t seem nearly as fun as spending, but after witnessing how COVID-19 impacted people’s finances and the way inflation made prices skyrocket, it’s a critical skill kids need to learn. Teach kids to put away a percentage of their earnings, whether the money is obtained from doing chores or as holiday or birthday gifts. It can make a world of difference. 

Understand investing is really saving. It might seem absolutely crazy to introduce young kids to the stock market and the practice of investing. But we all saw what happened with GameStop and the other viral investing opportunities that have been plastered all over social media. It’s important to step in and teach your kids how to invest before social media becomes your children’s financial advisor. The stock market doesn’t have to be a scary and overwhelming thing. Start kids slowly. For their first investment, have them pick a company (or product) they use. The app BusyKid makes the process easy and allows investments of as little as $10. 

Learn that borrowing has its price. Most kids think of credit cards as “get out of jail free” cards. Sit down with your child and lay your plastic out on the table. Have an in-depth discussion about interest. Let them know that cards don’t give you free money and that, unless you pay off an item the month it’s been purchased, you have to pay more for it. 

Track invisible money. Most kids just see their parents sticking their debit or credit cards into machines and then walking out of stores with purchases. They don’t understand the transactions behind the swipes. You can use your own debit or credit card accounts to show kids what goes on behind the scenes. Pull up your online account and talk to kids about the different columns on the card statement as well as the balances. Also, there’s no better way to teach kids these skills than to provide them with hands-on experiences. Research the debit cards that are available for tweens and teens, and set up your children with one, so they can get used to “invisible money.”

Focus on needs, not wants. When it comes to learning to budget, recognizing the difference between wants and needs can save anyone a lot of money. The earlier your kids understand the difference, the better they will be at saving cash. Before they make a purchase—even while grocery shopping—have them make of practice of asking “want it or need it?” 

Gregg Murset is the cofounder and CEO of BusyKid. The father of six and grandfather of two is also a certified financial planner, consultant, and advocate for financial literacy.