How to help your kids develop money skills to last a life time

by | Homeschooling Financial Education, Kids, Money and Responsibility

How to help your kids develop money skills to last a life timeFinancial literacy classes won’t help your kids develop money skills, because classes only provide knowledge. That’s it.

Money skills not learned in classroom

Schools don’t provide money for kids to learn and practice skills. For this reason, parents are the best people to create the financial experience that includes skill development. The only place for kids to practice money skills is in the home during their formative years.

Parents, if you don’t teach personal finance lessons to your kids, they likely will never receive any financial education. It’s your responsibility to ensure they are ready to leave your home with the skills, behaviors and system that will help them be self-sufficient members of society and avoid the pain associated with money struggles. ~Vince Shorb, CEO, National Financial Educators Council

Financial literacy as learned in class is the knowledge part of managing money. Knowledge is not enough. 

Memorizing the driver’s manual will not make one a skilled driver. When driving a car, the skill is manipulating the steering wheel and controls to arrive at the destination safely and on time. When driving, the car is the tool.

When managing finances, money is the tool. The skill being applied is that of decision-making. Good decisions make an individual’s financial life journey less stressful and more rewarding.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. ~ Ayn Rand

Kids need to develop something I call financial competency. 

Financial competency includes knowledge, skills and practice, along with behaviors and habits that allow an individual to make informed decisions regarding money.

Money skills take time and practice

Likewise, developing any skill takes time and practice. A three-year-old who starts a no-cash allowance will have 15 years of practice managing money. Financial literacy classes for teens are usually one semester, for a varying number of hours depending on school. 

“Try speaking a foreign language after one semester of anything, Shorb says.  Kids in school aren’t really getting anything about money. And parents aren’t training children to be good stewards of money and understand it and develop positive habits from a young age.” Teaching financial literacy: Why you need to start from a young age

Managing money is a skill defined as the ability to do something that comes from training, experience, or practice. A no-cash allowance provides the system and process for day-to-day money management that can be saved in printed form, handwritten for young kids, then spreadsheets, eventually financial statements.

Money skills in The No-Cash Allowance

  • Enter data, add and subtract from their balance 
  • Spend, save, and update account
  • Withdraw, deposit and update account 
  • Review account and discuss money with parents

Helpful Information. My book includes money terms for different age kids. For example, use money in and money out for preschoolers; and credit and debit for older kids.

Learning about cash is another skill to develop financial abilities. Common Core Math Standards place the first exposure of money in second grade. You can give your kids a head start before they learn about it in school.

There is a chapter in my book about teaching cash includes many activities for counting coins and exchanging for dollars. Also included are activities for learning the words and numbers for currency. There is a skills check that your kids can take to show they know their money math.

Managing the piggy bank: A five-year-old got his first allowance in coins to teach him about physical money. As he dropped them in his piggy bank, he started a written account he created himself. Maybe he liked writing numbers to see the balance without dumping out the piggy bank.

Understanding what financial literacy is (and is not) a subject worth more than one blog. You are reading the second of a three-part series. Check back weekly to read the rest of the series.

Part 1: How financial literacy classes place cart before horse in two important ways

Part 2: This blog: How to help your kids develop money skills to last a life time

Part 3: How to help your kids develop financial competency as they review their money behavior 

If you expect your child will become financially literate in school, you may be disappointed. Being able to manage money responsibly as an adult takes more than a classroom can provide. This is because financial literacy classes neglect elements that parents can easily provide in the home, skills, practice and behavior (habits).

Give your kids money with responsibility and the control to manage it all by themselves.

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