by Selena Garrison
As parents, we want our children to excel in life. We want them to do well in school, have great friendships, find their passions and pursue their dreams as productive members of society. All of these things that we desire for our children are great. Oftentimes, though, we miss out on teaching them incredibly important life skills surrounding their money, which can have an impact on every area of their lives.
The truth is, we aren’t born understanding how to handle money, and when left to his or her own devices with no instruction, most people end up not handling it very well. For evidence of that assumption, note that nearly 80 percent of Americans are living paycheck to paycheck, with the average American carrying $38,000 in personal debt, excluding their home mortgage. The good news is, that we have many resources at our disposal today to not only help ourselves form good financial habits, but also to help our kids do the same!
What we know is that people learn their financial habits from their parents and other important people in their lives. If we, as parents, are not teaching our children appropriate ways of handling money, the likelihood of them falling into poor habits is very high. The good news is, we have many resources at our disposal today to not only help ourselves form good financial habits, but also to help our kids do the same!
What is financial IQ?
A person’s financial IQ is defined as their ability to obtain and manage their wealth by understanding how money works. The six areas used to determine someone’s financial IQ are spending, credit and debt, career and income, investing, financial planning, and risk and protection.
How can I help boost my child’s financial IQ?
For better or worse, your kids have a high likelihood of following in your financial footsteps. If you want your child to have a healthy financial IQ , it is incredibly important that you lead by example. Explain to them what is happening when you use your debit card at the grocery store. Talk to them about what you are doing as you pay bills. Help them to understand that we can’t spend money that we don’t have.
You can begin teaching your children about financial topics when they are very young. For example, my 3-year-old is currently learning about spending, saving, and giving at a basic, by dividing up her allowance into a piggy bank with three sections. My 7-year-old is starting to help us with the household budget. It’s never too early to start teaching them. You can also begin to implement money saving strategies so that your kiddo can understand that money doesn’t grow on trees. When they get excited about money they received over the holidays or for their birthday, try teaching them to save some of the money and write out a goal of what they will spend their money on.
If you don’t feel confident in teaching your kids about money because you feel like you don’t handle money well, start by educating yourself. Two of my personal favorite books for teaching yourself about money are “Total Money Makeover” by Dave Ramsey and “Get a Financial Life” by Beth Kobliner. By raising your own financial IQ , you will set your child up for success as they learn from your example!
There are also a number of online materials you can access, as your child gets older. The Foundation for Economic Education or (FEE) is an educational foundation devoted to helping boost financial IQ in young adults. FEE has many free online courses as well as in-person seminars and free books for the classroom that can help your teen become more aware about money and its importance.
Also, check in with your local bank or credit union. Many have programs directed at children and family finances. Bringing them in with you while you do some simple banking transactions is a great learning tool.
Teaching your child about money doesn’t have to be a daunting task. The key is starting them young and continuing to teach and show them throughout the years. Soon enough they’ll be great money savers!