Teaching Financial Literacy to your Children Prolongs your Legacy
Teaching financial literacy to your children is the surest way of keeping your wealth beyond generations. Financial literacy for teens and the younger ones below ten is paramount in this dynamic world. Several factors now affect one’s finances than in the past decades, and families that don’t prepare or help every member get the gist of financial issues may lose their wealth – slowly, through financial ignorance. This means that part of an adult’s financial education includes transferring the same education to their children.
I have shared a message close to my heart in the past weeks, and it was about continuity in wealth-building. I shared that, “Your inheritance money and assets are OK, but if your kids don’t have the skills to manage and grow wealth from where you left off, they will eventually put everything to waste and take your family back to poverty.” This is so true and always drives my emotions up the roof each time I talk about the future of a family’s finances.
I posted the above message to show you some of the advantages of hiring your children. These advantages include learning financial literacy, growing their business acumen, and financial management skills such as budgeting, saving, and investing. From the above, you can see that financial literacy can be learned in many ways, including hiring your child and letting her observe while you prepare your taxes and do your bookkeeping and accounting. They will also learn how to handle their salaries at a young age. And many children like this grow up understanding the value of money and how to expand and preserve its value.
Nevertheless, how does teaching financial literacy to your children helps preserve generational wealth?
- Financial literacy helps kids with money management skills
Money management skills include saving, investing, and borrowing. I am sure you have learned about the importance of good use of debt to build wealth. People that use debt, or other people’s money, to build generational wealth do so because they have vast knowledge about finance. Therefore, by teaching your children financial literacy, you are helping them gain all such skills. They will also know how and where to save and invest their money at a young age.
Armed with such knowledge, even if you die and leave a lot of wealth for your family, you know it will be in good hands. They will have the knowledge to manage their money while carefully investing in further building your family’s net worth.
- Financial literacy helps kids make better financial decisions
Building and preserving wealth is a series of ongoing financial decisions. These decisions are well-articulated and timed on the back of strong financial knowledge. Therefore, if your child lacks this and they eventually become in charge of your family’s fortunes, that may mark the beginning of the end of your wealth.
For this reason, we should teach our children financial literacy so that they are better decision-makers when they have millions of dollars at their disposal. Money has a way of messing up people’s minds. I have been in the same boat, so I understand what I am talking about. I once shared with my followers how I used to be a shopaholic – and to be honest, most of us can easily get trapped in this wasteful habit. However, if we catch our kids young and help them with financial literacy, such habits could be the last thing to worry about when they eventually have the keys to the family’s wealth.
- Financial literacy helps kids understand the value of money
Investing and growing your wealth is all about the time value of money. The time value of money states that money is worth more today than it will be tomorrow. In other words, you can buy more with a dollar today than you will buy with it in the next two years. So, the only way to ensure that the same dollar grows and is enough to buy the same things or even more after two years is to invest it. And if you fail to invest it, you would have lost the opportunity to preserve its value.
So, when you introduce financial literacy to your children, they learn about all this. The next time you give them pocket money, and there is change, they will be asking you how they can invest that same money so that it grows. The same children will grow up with the same mind – of investing and growing their money – and become good trustees of your fortune when you eventually die. They will not only seek to spend, but they will ask questions about how to grow what they already have.
Conclusion
Therefore, all the above are reasons you should teach your children financial literacy. If you own a business, one easy way of making them learn this is to hire them. This is because when you do, they eventually start earning their own money – which they will use to make financial decisions like spending and saving. But if you don’t, there are other means such as financial games that you buy for them. If you want to learn more about financial literacy, tune into my weekly radio show, The Money Zone, on rippedradionetwork.com every Tuesday at 7:30 PM EST.
Frequently Asked Questions
- What is the best age to teach financial literacy?
You can start teaching your kids financial literacy at any age. You only must use a suitable method for each age group. For example, you may use games to help your 5-year-old learn financial literacy and use a different approach for your teen daughter, such as talking to them and giving them financial management tasks.
- Why is it important to teach children about financial literacy?
Not every family starts off rich. But with financial literacy, family members may know how to use all the resources they have to start building wealth from zero and preserve it for generations. Your children are part of the family; they have a role to play too. They can only successfully play their part if they understand finances.
- How do you teach children financial literacy?
There are many ways of teaching children financial literacy. You can use games, hire them, or talk to them and give them financial literacy tasks and challenges such as savings goals/targets.
- What are the benefits of teaching children about money?
Children who have knowledge about money won’t get shocked when they eventually have plenty of it. This protects them from overusing the money or abusing it on dangerous items such as alcohol and drugs. Instead, they will further build generational wealth for their families.
- How do you introduce financial literacy to a child?
There is no best way to introduce your child because, depending on when you start knowing about this as a parent, you all start teaching them at different ages. However, financial games are a good ice breaker. You may also start giving them pocket money and insist on them saving a part of it. You should slowly introduce more financial literacy activities to them as time goes on. Do not just dump everything on them because it may become too much, and kids do not like that.
- What are the three main components of financial literacy?
Three main components of financial literacy are saving and investing, borrowing, and understating how you are taxed.
