April 16, 2021 – AWE Learning Staff
April is Financial Literacy Month; it is an effort to improve financial literacy among our nation’s youth and promote financial well-being for all consumers. Financial literacy is defined as the ability to understand and effectively use financial skills such as personal financial management, budgeting, and investing. It is important for both children and adults to be able to manage their money, understand financial status, and plan for their future.
Do your children receive an allowance? Do they put money in their piggy bank? These simple actions expose young learners at an early age to financial literacy, specifically earning and saving. When children use a piggy bank at an early age, work with them to set a realistic goal. When they reach that goal, they can use the saved money to purchase an item or experience. As they see the piggy bank filling up or feel it getting heavier, they will see the steps they are making to get closer to their goal.
Below are seven basic lessons to teach financial literacy, provided by U.S. News:
- Define the difference between wants and needs: Making good decisions is a large part of financial success. Introduce children to needs such as food, shelter, clothing, and wants such as toys.
- Every purchase has an opportunity cost: Children need to understand that when they purchase an item, the money spent on the item will no longer be available to them,
- The repercussions of making a money mistake: If children spend all their money saved at once, they are left with no savings. Reinforce this when they make a purchase and remind them about need vs. want.
- How to delay gratification: Remind children to think about how the money can be spent in the future if you save it now.
- How credit works: It is important to comprehend that credit means borrowing from others and comes with a cost.
- Time helps money grow: Stress to your children that money has a time value. Set up a bank account for your children to track the growth of their money.
- How money works in the real world: Reinforce what money is and its importance of having the needs we require, including shelter, food, clothes, etc.
While many financial literacy concepts seem too advanced for elementary students, exposing children to money at a young age is important. Whether it is saving coins in their piggy bank or saving their birthday money or allowance, these are important lessons. Spend time with your young learners to count money, both coins and bills, and remind children that technology plays a growing role in finances.
Teach children in real life situations and model how you make spending decisions. When you are at the grocery store, remind your young learners that the food you are purchasing could not be purchased without the money, or savings, that you have. Remind them that when you are cooking breakfast, lunch, or dinner, you are using the food that you purchased at the store.
Financial literacy lessons do not have to be boring or textbook-based; incorporate these lessons into your daily routine!