Teaching them at a young age to set goals, work within a budget and save for the future are just some of the ways.

Financial literacy is one of the most crucial skills a person can possess, providing the knowledge and tools necessary to achieve financial success.

With only 57% of American adults being financially literate, a strong education in personal finance is more critical than ever. An understanding of financial literacy can have a profound impact on children’s future success and well-being, fueling financial independence and thoughtful financial decision-making. In order to achieve this, we must establish financial goals for our children early, by teaching them strategies for success, helping them envision and plan for their future and empowering goal fulfillment.

Teaching children how to manage finances requires more than just a list of rules — it involves instilling a financial mindset. From proven strategies that nurture success to engaging activities, we can uncover the pivotal role parents play in goal establishment and fulfillment. This guide will prepare you to teach your children how to equip themselves for building a financially sound future.

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Set goals

Goal setting should include immediate, intermediate and long-term goals to ensure your child learns to continuously set goals throughout their life. Immediate goals, such as saving for a desired toy or a new video game, instill financial responsibility from an early age. This will help foster your child’s understanding of money’s value and cultivate a sense of financial accountability. Intermediate goals, like saving for a musical instrument or an iPad, introduce the concepts of teamwork, budgeting, dedication and responsibility. Achieving these goals boosts their confidence and nurtures a profound sense of accomplishment.

On the other hand, long-term financial goals, such as saving for higher education or a future home, equip children with the tools necessary to build a secure financial foundation for themselves and their future. By helping children set realistic and achievable financial goals that align with their passions and values, we can help instill a sense of personal accountability and motivate their dedication to financial success. Through this, children learn to break down their aspirations into manageable steps, navigating challenges and celebrating milestones along the way.

Build a financial vision board

In a world of screens, the concept of a vision board offers a tangible and creative approach to nurturing financial aspirations through visualizing financial dreams. Children brainstorm various financial goals, bringing their future aspirations into the present. Armed with magazines and printed materials, they select images that resonate with these goals. As they arrange and affix these images to the poster board, the process becomes an act of manifestation.

Furthermore, labeling each image with a corresponding financial goal deepens the connection, prompting questions like: Why did you choose that goal? What steps can you take to achieve it? What challenges might you encounter along the way?

Engaging in discussions about each goal opens the door to insights and exploration. Once the vision board is complete, its display in a prominent place serves as a constant reminder, sparking reflections and reaffirming commitment.

Empower goal achievement

Teaching the art of budgeting is a necessary step to lay the foundation early for how they can one day balance income, expenses and savings. Through this process, children learn to prioritize spending wisely and make informed financial decisions, which fosters responsibility and accountability. Additionally, things like encouraging children to set up a savings account and allocate a portion of their income toward their goals instills discipline. This early habit becomes a cornerstone of responsible money management.

To take their financial journey to the next level, leveraging tools like Invstr Jr., an investing app designed for kids, can be highly beneficial (I am the founder and CEO of Invstr). This app empowers them to define, track and even reward the achievement of their financial goals. It makes the entire process interactive, engaging and relevant to their digital world.

Lead by example

Parents leading by example create a tangible model for their children to follow. When parents demonstrate sound financial habits and share their own financial goals, their children have a front-row seat to observe real-life insights and practical guidance. It is critical to involve children actively in the process of setting goals and nurturing a sense of ownership. This sense of responsibility cultivates commitment and dedication, qualities that are vital in achieving these goals.

Furthermore, equipping children with these strategies and resources enhances their grasp of the financial world. Teaching them about the dynamic force of compound interest, introducing diverse saving methods and demystifying budgeting and investing concepts empower children with invaluable knowledge in personal finance.

A final thought …

Throughout this journey, it's crucial to tailor your guidance to your child's developmental stage. Actively participating in their financial education, parents lay the groundwork for financial literacy, responsibility and skill-building. It's not merely about setting financial goals; it's about cultivating a lifelong connection with money rooted in self-empowerment. The lessons learned today will shape their financial journey tomorrow.