Financial Literacy Tips for Parents

Most parents of teenagers didn’t receive a financial education in their youth, and among many that lack of education shows. Since these parents have little confidence in their own money knowledge and competencies, many fail to teach their kids the vital personal finance skills they will need when they move away from home. But where should parents look to find financial literacy tips and information?

Here’s a tip from a “financial literacy 101” viewpoint: “The key to saving money is spending less than you earn.” That may sound simplistic, but it’s a practical reality. The overarching objective of a money management course should be to help young people reach their financial goals. And creating a savings plan, in addition to learning the basics of investment so those savings can grow, is fundamental to achieving one’s short-term and long-term money goals.

Another standout among the most important financial literacy topics is financial psychology. Nearly everyone becomes emotional when facing an important financial decision. The most common emotions money evokes are fear and greed. We avoid taking money risks out of fear that we will lose it all. Or we take stupid risks because we’re greedy to get more money. Discovering how to distance ourselves from those emotions and make objective, well-informed financial decisions is one of the best lessons we can learn.

Risk management forms another key component of a solid financial literacy education. We may not think of choosing an insurance policy as risk management, but that’s essentially what it is. We buy insurance to protect ourselves—and our loved ones—from loss.

A final tip for teaching financial literacy to kids is to include a lesson about entrepreneurship. In today’s global economy, often the best way for a young person to break into the workforce is to start his or her own small business. Parents should help adolescents identify their passions and talents, and find ways to turn them into cash. 

Leverage these financial literacy tips and commit to continue your financial education throughout your life.