How to Raise Financially Smart Kids
We all know some things are much easier to learn when we’re kids — other languages are a great example. One thing that is also easier to adopt as a kid is a financial literacy. Unfortunately, a good chunk of parents doesn’t do much to set their kids up for financial success. A study performed by the University of Illinois found that a whopping 36% of young adults find themselves financially at risk. You may be wondering how the researchers determined this. Getting into scientific detail would be beyond the scope of this article, but we can explain the study and its implications in simple terms. The researchers sampled a pool of over 3,000 adults to assess their financial practices, understanding of basic economic concepts, and overall financial aptitude. To be deemed “financially at risk,” participants needed to fulfill two essential criteria: they had no savings they could use to pay three months of living expenses, and they had no way to come up with $2,000 in an emergency. While some members of the scientific community have described these criteria as “somewhat arbitrary,” they are undoubtedly helpful when it comes to presenting the bigger picture — many young adults are a setback away from bankruptcy.
[Source: Unsplash]
1. Generational Ripple EffectThe 22% of young adults that the survey deemed “financially stable” had savings or checking accounts were less likely to use the services of payday lenders and were better at planning their finances overall. However, even most of these individuals only described themselves as “moderately comfortable” about their financial literacy. The study’s lead author, Gaurav Sinha, believes that this issue may lead to further financial illiteracy in future generations. In an interview with Science Daily, he expressed concerns about young people’s inadequate financial skills and their ability to ensure both theirs and the well-being of their children.
2. How to Teach Your Children to Be Financially StableThe findings of this study suggest a dire need for parents to become much more engaged in their children’s financial literacy at a much younger age. Our friends at MNYMSTRS financial literacy for beginners have presented us with three simple ways to set your kids up for financial success. Let’s explore them together below!
Delayed GratificationIt seems that each new generation faces more difficulty when it comes to resisting the allure of instant gratification. Millennials have probably long thought that delaying gratification could not possibly be more difficult, but we would argue that Gen Z-ers have had even more distractions to deal with. Since their early childhoods, almost everything they wanted has been instantly available. Want to listen to your favorite song? Just stream it on YouTube or Spotify. Need a new pair of headphones? Amazon Prime can deliver precisely the model you’re looking for on the same day. Are your friends talking about a new app or video game? Just press a button on your controller or tap your phone’s screen a few times, and it’s yours. Whether it is physical possessions or digital entertainment, very little compels this generation to learn about the value of patience, persistence, and the power of time. It’s not their fault either — it’s just the hand they’ve been dealt. Unfortunately, acquiring wealth is not a one-click sort of endeavor (at least not for the time being). If you want to reap the benefits of your investments, you need to sit back and wait for the stock (or crypto) market to do its thing. It is your responsibility to teach your kids that not everything they want can be achieved instantly. Whenever possible, try to instill in them the value of delayed gratification. For example, if you have an allowance system in place, consider switching to monthly rather than weekly payments. This will teach them to pay attention and control how much money they have left until the next month rolls around. Just make sure not to budge when they inevitably come running for more cash after a week and a half. If your kids are still too young to have an allowance or deal with money directly, have them plant their favorite fruit or vegetable, and observe the literal “fruits of their labors.” We don’t need to explain why this analogy directly applies to the world of finance.
Embrace TechnologyYou might have had the mildly unsettling experience of seeing a kid try to swipe up a magazine cover like it was a touchscreen. We’re living in a new world, and for today’s kids, it is all they’ve ever known. For them, there was never a time without ubiquitous WiFi, smartphones, apps, and social media. In the previous few paragraphs, we might have sounded like we had some kind of problem with technology. On the contrary, we think it is an excellent opportunity to grow. We’ve all used technology to collaborate, create, buy, sell, make friends, learn, etc. The point we’re trying to make is that, for this generation, technology is almost inseparable from the “real world.” So, if you’re trying to teach a kid about finances, your best bet is to incorporate some technology to keep them interested. Thankfully, we’re not the first to think of this, and there is a wide array of software tools and apps geared towards teaching children about finances — even kids as young as five. Apps like iAllowance, Rooster Money and FamZoo let children keep track of their allowance and chores while teaching them financial skills through a wide array of gamified visual tools. If you want to sneak in financial education without boring your kids to death and force-feeding lessons, use the technology they’re comfortable with. Photo by Annie Spratt on Unsplash
Incorporate Experiential LearningChildren nowadays have access to all the information they need, and they’ve had it from a very young age. Learning to sift through the information, figure out what’s important, and which sources can be trusted is the journey of a Gen Z-er. Back in the day, when a kid had a question about the world, they would default to asking their parents; now, the situation is a bit different. Sure, parents do get asked a question from time to time, but only if Google has failed to provide a satisfactory answer, However, one thing that Google can’t impart to your child is the real-life experience of managing finances. That said, if you simply sit your kid down for a lesson, they’re probably not going to be very interested in listening. This is where experiential learning comes into play. If you want your kids to pay attention, take them with you the next time you visit your financial advisor or show them how to balance a checkbook or fill out a check. Things like setting up your family budget for the month or reviewing the interest you’ve earned on your savings account may sound like tedious everyday activities to you, but to your kids, it’ll be like entering into a new reality. These activities will set the scene for you to have the all-important financial conversation with your children, and if there’s one thing you can’t Google, it is a practical experience.
Closing ThoughtsWouldn’t it be great if our educational system was more focused on teaching students how to be financially savvy? Unfortunately, at least for the time being, the burden of this responsibility lies with parents and caretakers. However, this also means that if you can teach your kids how to be smarter with their money, they’ll likely have a leg up on their peers, putting them in a great spot down the road. Most importantly, by teaching our kids how to be smarter with their money, we instill the right financial habits in them before they develop the wrong ones on their own.
About the AuthorEllie is a long-time marketer, currently working as a freelancer in Miami, Florida. She is also a passionate writer and loves to explore new, innovative and digital news. In her spare time she is an eco-activist. Editor at Digital Strategy One. The post How to Raise Financially Smart Kids first appeared on Reviewz'n'Tips. Via Tech http://www.rssmix.com/via Blogger http://erinecassy.blogspot.com/2021/09/how-to-raise-financially-smart-kids.html September 24, 2021 at 09:57PM
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