Financial literacy is key to understanding how to save, earn, borrow, invest, and protect your money wisely. It is also essential to developing short and long-term money habits and skills that lead to greater financial well-being. National studies have found that only 1 in 5 teenagers in the U.S. had basic-level skills regarding the principles of saving money. In fact, students in other developed countries faired far better than Americans –including Russia, China and Poland.
Now more than ever, students need education and resources to help them understand how to make it through difficult financial times. At least 72% of students say personal finance stresses them out. The current world health crisis cause by COVID-19 could put an added financial burden on many young people.
Games and puzzles are an increasingly popular and legitimate way to teach students of all ages useful skills and concepts. Educating young people about money is an important life skill that can be a lifesaver. Classic games like Monopoly, Life or Payday –as well as online games like Dungeons and Dragons –are a great way to introduce earning, saving and spending concepts.
Before you can focus on more complicated concepts like investments, kids must learn the basic concepts of what money is and what different bills and coins are worth. Coins are a great starting point to show children since they can begin collecting the coins and add to their savings. A piggy bank is a proven method for teaching children about saving and investing. At WaFd Bank, we provide children with “Walt the Vault” during their first bank visit to get them excited about using a piggy bank. Encourage your kids to do more than just “save” their allowance. Help them to divide it into four categories like save for emergencies, spend for wants and “now” items, donate to charity and invest in a savings account.
A trip to the bank to open a child’s first bank account will also help them understand the money process. This will give them the opportunity to see how banking works, why having “money” doesn’t always mean a stack of physical cash and the importance of earning interest.
Parents can also talk about the value of the dollar bills they are spending during a grocery store trip. There is nothing like hands-on experience. Let your helping hands know you have $100 to spend on groceries and share your itemized list with them. Ask your kids to help you total up the cost of the items as you place them in your cart. Demonstrate the power of coupons and sales by bringing a couple coupons with you to the store and showing how percentages and buy one-get-ones can help you save. Comparison shopping is also key in learning about savings and investments. In need of a new dishwasher, washing machine, dining room set, or other major purchase? Make your kids part of the process! Let them know what you’re looking for, talk through the importance of shopping around and ask them to help you search.
Start by teaching children the basics at a young age and advance the complexity of the topics as they age. When you make it a regular part of their lives, financial literacy for kids comes more naturally and easily than you would expect.
Melissa Swift is vice president and treasury relationship manager for commercial banking at WaFd Bank Arizona.