How to teach children financial literacy

You can prepare your children for the proper treatment of money, following the advice from this article.

This manual is made to help parents develop financial literacy in children . To do this, parents, you need to take the following steps:

  1. tell what the [barter] is (or the exchange of goods), and talk about the universality of money
  2. introduce a child to ] the denominations of the bills and coins, enter into the arithmetic of the account
  3. tell how you earn money and what you spend
  4. to explain that the child is already now can earn money [for work at home, for example]
  5. to explain the difference between needs and wishes
  6. when buying a gift, to allow the child to make a choice himself
  7. explain the principle of accumulation of [money for money] How to teach children financial literacy 


    Financial Literacy Is the ability to use knowledge and skills to make the right decisions about money and waste. Financial literacy affects a wide range of financial topics ranging from daily personal financial accounting skills to long-term personal finance planning for retirement.

    Unfortunately, financial literacy is not taught in schools : only in 2012- In the 2013 academic year, experimental teaching began among high school students of Ukrainian schools. As reported by, “ the pilot course” Financial literacy “will be taught in 68 general education schools, including in colleges, in 14 regions of Ukraine for students of the 10th grade during the 2012-13 school year “. But despite the state’s attempts to influence the financial literacy of children and adolescents, the main teachers of financial literacy remain parents (or guardians).

    There may be an obstacle in the form of an excuse that “ I myself do not drag myself too much in finance “or” I already have financial problems, so what can I explain to the child? “. But these are just excuses, which are not the reasons. First, you have experience (both positive and negative) that you can pass on to your child. Secondly, you can develop and financially improve along with the baby and become for him an example for imitation. And thirdly, you do not need to be a financial guru to explain your child the basic principles.

    It is important for parents to understand that sooner or later the children will still hear some facts about money

    and they will have an impression of finance, based on data from outside. These data from the outside, as you know, are often erroneous. Classmates can say that the rich can only become if you steal. Or on a sports mug someone can blurt out that only lucky ones will become successful. Imagine the impact these statements can have if your child seriously believes his “friends”. Therefore, your participation is important, that everything should fall into place: you should tell the child that you need to earn money by honest work. And, again, you do not need to know the difference between a weighted and exponential moving average in order to tell the kid the basic concepts of money, economy, and financial literacy.By teaching children of financial literacy, you will help them to clarify for themselves the links between work, costs and savings; they will understand the price of money and learn how to make financial decisions correctly. So let’s get down to work.

    What is money; barter

    At an early age, children begin to understand that money is needed in order to buy something. But they often misunderstand the real nature of money; and how money gets to parents in pockets – too.

    Tell to a child about how people traded in antiquity: that they exchanged goods . For example, a cow could be changed for 30 hens, or a clay pot on a loaf of bread. And let this method be effective for a while, there were three big problems (let allow the child to come to them himself with the help of an analysis of your leading questions):

    • items for exchange were difficult to transfer: “ which is easier to bring to the bazaar: a bunch of grapes or an ass?
    • the goods for exchange were discrete, i.e. it was difficult to break them: “ what to do if you have a goat, and you need bread? to change a goat to a loaf of bread – is it profitable?
    • the goods spoiled and lost value with time:” how much does the freshness of the egg preserve? Do you need some rotten meat?

    And now tell to the child that the universal goods – money

    were invented which solved the three above-mentioned problems. The first money (in our understanding of the term) was gold coins: they did not lose value over time, they could be issued in different denominations, and they were easy to carry. Well, gold was always in price because of its beauty and physical properties.

    What is money

    It’s all simple. Show to the child everything (if possible) denominations of notes and coins of the currency of the country in which you live. Tell us that most countries have their own currency, and it basically consists of similar coins and bills.

    Tell us about the value of each denomination, and practice together the simple monetary arithmetic: “ how many hectares in the hryvnia? “or” how to collect the amount of 64 rubles? “. Leading questions may vary depending on the age, knowledge of your child and other aspects, but here are some universal side-notes:

    1. put in front of the child a bunch of coins: let the child put them into groups at par value ( so he (a) learns to distinguish more quickly coins of different denominations)
    2. tell to the child what kind of names there are in coins and bills: “fifty kopecks”, “quarter”, “nickle”, “chervonets”; tell me what you can buy for each denomination (the child will have the concept of the value of each coin and note)
    3. ask the child to add different amounts: “how to collect 6 and a half hryvnia?” or “what coins and bills would you take , what to pay 131 rubles, 67 kopecks? “
    4. Finally, to consolidate knowledge, go to the store in an unloaded time and allow the child himself to pay for the purchase

    After playing with coins and bills, carefully wash the hands of the child and teach him to wash his hands constantly after the contact the one with the money, because money is “pass”, and thousands of hands are in a completely different and unexpected places.

    Alternative types of money

    Tell the children about (and if possible show) payment cards, traveler’s checks and checks, and other types of money. It is obligatory to explain that the wood resource in cards and checks is not unlimited: all operations with alternative methods should still be paid with real money earned.


    Babies understand that parents have money from somewhere, but it’s time for them to explain in more detail where the money comes from. .

    Tell the children that Earn Money. Tell us about about different work options: someone is paid hourly, someone is paid fixedly, and someone – for the project. Also tell that you can look for a short-term job, but you can build a career. Also – that you can become an entrepreneur and start your business, and about the additional difficulties associated with this occupation (unstable income, dependence on yourself, investments, etc.).

    Next tell to the child how earn money you . For example: “ I work as a financial consultant in a large company. Every month I receive a fixed salary. Money we spend with your mother for the needs of the family, and a little for different wishes and entertainment. A small part of the money we postpone for unforeseen future expenses.

    After the child realizes that money is needed to earn he may be interested, how he (a) can earn money already now . And this is absolutely sound desire. In response, you can offer the child to make money, doing some work around the house. Also there is the prospect of receiving additional cash bonuses for the holidays (such as birthday, new year, etc.). The child, realizing that he can “earn” money himself, as a rule, is encouraged and lights up the prospect of earning the opening of his own business. But if your child begins to throw ideas of opening his own business, which by our standards seems to be complete (or partial) delusion, in no case do not dissuade him, but listen to no matter how strange or absurd it may be idea: he (a) is not going to implement it now and you will have time to discuss all aspects. And if you tell a child something like “ you can never do it ” or “ this is a bad idea then you can significantly hurt his entrepreneurial spirit and self-confidence.

    When thinking about the future profession of your child, consider the following:

    • which are the most favorite (successful) subjects in school?
    • why exactly these subjects, and not others?
    • which professions can use skills from these subjects and sciences?
    • what are your favorite hobbies?
    • are there any options to reverse the hobb ? In employment

    Pocket Money

    Giving money to children on a regular basis – it is normal practice. These small sums will allow the child to receive the material to be consulted in developing financial literacy skills . Only it is important to learn how to regularly pay the amounts to the child; for example, every Monday morning (before the start of the school week) or every Friday. And increase the amount each year.

    In addition to a simple regular (linear – technically speaking) giving money to a child, there is also a method based on the work done. He assumes that [thechildreceivesmoneyforperformingcertaintypesofwork

    in the home.Regardless of which method you choose, be consistent : if you give money without a peg to work at home, then pay, even if the child has performed poorly or not at all (and in parallel use other methods of influence for educational purposes). If you still pay the child for the work done, then encourage overfulfilment of the plan, and fine for failure to fulfill.

    Needs vs desires

    An important component of the child’s financial upbringing is an understanding of what is need and what is desire. 19659002] The need for – what you need for survival

    Desire – what we would like to have

    There are a number of free needs and desires: air, the opportunity to do a morning run or evening walk, fresh water in the creek, etc. But for most needs and desires, it is necessary to pay .

    Examples needs :

    • house (in a broad sense)
    • food
    • health care
    • clothing

    ] Examples desires :

    • technological novelties (smartphones, tablets, players)
    • jewelry, costume jewelery
    • cinema, television, computer games

    For a good example, the child’s analytical process with a question like “ Would you like to spend all our wages on toys? What would we eat in this case? Set the dialogue so that the child understands that paying bills for public services and buying food – where is more important than the desires of yours or him. [19659002] At this stage, the child will have a predictable desire to find a solution: just spend more on all articles at once. But your task will be to remind him / her of your salary / income and that it is finite: it is impossible to simply take more money from nowhere.

    Look at the magazine or the catalog, indicate the child needs and wishes, so that his understanding is fixed. During the trip to the shopping center, show demonstrative needs and demonstrative desires. And continue to ask suggestive questions: “ do you think it will be easy for us without a refrigerator?” can pierce pay for water? what it is more important to buy: food or a toy?

    For a clearer idea of ​​what the cost ratio is for needs and which for wants, make a simple pie chart divided by 3-5 sectors, which will be the main items of family spending. There must necessarily be a “wish” sector there, so that the child understands how many resources are provided for this article. Color the diagram together: it will be fun.

    A direct link to the diagram; after the transition press “print” in the browser to print; you can also adjust the chart to suit yourself by changing the numbers after “& chd = t:” in the address bar of the picture.)

    The right choice: where to spend money

    Everyone makes decisions about where to spend that or a different amount. If you accustom your children to make a conscious assessment of options and choices, you will give them self-confidence, develop a habit of determination and leave a useful experience.

    Depending on the age your child (children), the complexity of the following techniques will differ, but the essence is to remain unchanged.

    After completing the steps described above, your child should already understand that money is a limited resource and that most of the family budget (usually) are spent on needs. Now it’s time to explain to the child that he has a choice . The choice is whether to buy pens or pencils, a soft toy of a lion cub or cat, get a bicycle or a scooter with a ball, an iPhone with a ipad or a mac book pro, etc. So, start giving the choice from the simple: from the list of equivalent products.

    After the child makes a few simple choices, begin to complicate the equation, and bring in it the value variables: “ The ball costs 100 hryvnia, and the robot – 200. You can buy a ball and something else for 200 hryvnia “, and the child will have to think about it. Weighing, whether it will be more carefully select what kind of goods he really needs; this process of reflection is very important.

    After several decision-making with regard to cost, make new variables : causes for and causes against . Ask the child to write the list of what he wants most, and then let him make the reasons for and against. For example: the reasons for the purchase of the latest iPhone model can be such:

    • my friends will respect me
    • he is comfortable, stylish and aesthetic
    • he will help me in studies and daily tasks

    The reasons against purchase:

    • it is expensive
    • I already have a smartphone that performs most of the functions
    • I will rid myself of the false “friends” who are drawn to me because of the last iPhone

    And when the child has a list of reasons for and against for each wish, write an additional parameter in this the table is also approximate the cost of the goods and you will get an excellent summary table.

    Ask the child to narrow the list to 1 item and say that the child will have to spend 10 percent of the amount (or another percentage at your discretion) of your own pocket money. When a child evaluates and makes a decision, especially when considering the need to spend his money, he or she will carefully approach in the decision. In the end it turns out that this new iPhone is not really needed.

    If you suddenly disagree with the choice of the child, in no case it is not necessary to say that “ this is bad choice “, because you are demotivating it. Instead, point out the advantages and disadvantages of this or that choice and try to give the child the most transparent and objective picture. But the final decision should be taken by the child himself (within reasonable limits, of course).

    Principle of accumulation

    Sooner or later the time will come when your child will want to buy some rather expensive thing which neither you nor the child can buy at once. Such a circumstance is an excellent moment to begin to explain to the child about the principle of accumulation .

    Also, how do I periodically wait in line for a purchase, wait for a birthday or another holiday, etc., to buy an expensive thing you have to wait . And this expectation implies the accumulation of money.