Why Allowances Are Not Enough to Teach Children Financial Literacy
Teaching children financial literacy is an essential life skill that can prepare them for a successful future. As mentioned in other posts, allowances are excellent tools to introduce our children to money management. However, while allowances can effectively teach children about money, it’s important to remember that they are not enough on their own. In this blog post, we’ll explore why it’s essential to discuss financial topics with our children.
Why Allowances are Not Enough
While an allowance can be a great start to teaching children about money management, it does not thoroughly teach children about the complexities of financial literacy. An allowance alone only provides children with money to manage, but it doesn’t teach them how to manage it, what budgets are for, or how or why we need to save and invest.
While an allowance can provide your child with opportunities to practice many money management skills and habits, it can not teach what those habits are, why they are essential, or how to maximize their benefits.
Money discussions can introduce children to most financial literacy concepts. Parents and guardians can help children learn how money can be used to achieve short-term and long-term goals. They can also help children understand the importance of saving, investing, and spending wisely.
Discussions about money can also teach children about the consequences of financial decisions. Allowances allow children to experiment with financial decisions, but children may not understand the consequences of their actions without guidance. Discussions about money can help children understand the effects of their financial decisions on their future.
Discussions about money can help children understand their families’ financial values and priorities. Financial values are an important legacy to pass down to your kids. For example, how you give back to your community or the value you place on education can all be conveyed with money talks. Similarly, parents can use conversations to teach their children the importance of paying bills on time, creating a budget, and saving for the future.
While allowances are a good start, discussions about money and financial topics are essential to thoroughly teaching children financial literacy. Parents should take the time to have regular discussions with their children about money and lead by example by demonstrating good financial habits themselves. By doing so, parents can help their children build a strong foundation for a successful financial future.