By Neil Edmond
We've spent a lot of time thinking about financial literacy and putting together an effective program we believe teaches children everything they need to know about personal finance. We are happy to share what we believe makes a robust financial literacy curriculum. Some of the later topics listed below may be too complex for younger learners, as our Money Time program is geared specifically for the 10 to 14 age range, although we have had many homeschoolers tell us they have found it to be effective with slightly younger and older.
Earning Earning money gives people more choices in life. Introduce children to ways they can make money and what it means to be paid an hourly rate versus a salary.
Saving Money in a bank account is relatively safe but there is an additional benefit – it can earn interest! Teach children the importance of saving and the differences between everyday checking accounts and savings accounts.
Interest Earning interest is an easy way that everyone can make money. Introduce the concept of simple and compound interest and explain the benefits of starting to save early.
Career Choice Choosing a career is a very important life choice. Start them thinking about what they are good at and discuss what is important when choosing a career.
Writing a CV Preparing a CV is usually the first step towards securing a meaningful job. Children can have fun thinking about their strengths and the things they like about themselves to create a CV.
The job application process Writing a good cover letter is an important part of a job application. As well as learning about the job hunting process it is a good idea for children to practice their reasoning (why they should get the job!).
Pay and Tax It’s great to be paid for doing a job, whether it’s via wages or salary. However, it’s important for children to realise that some of their pay will be paid as income tax. Discuss why income tax is necessary and how it is calculated.
Smart Spending Explore ways your children can get the best value when spending their hard earned money. Buying cheap is not always the answer! Discuss the pressure they might experience from peers or advertising to buy things.
Using Budgets Budgets are the most powerful tool students have available to control their spending. Teach them how to create a budget and explain what they should do if their expenses are greater than their income.
Banking Your kids will be getting bank accounts soon, if they haven’t got them already. Teach them how banks make money, how money gets in and out of their accounts and how they can keep track of it.
Paying Most children are used to paying for things with cash and many have their own bank card. Introduce other ways of making payments that they need to know about.
Borrowing Borrowing puts the borrower into debt but this is okay if the money has been borrowed for a good reason and they have the ability to repay it. Talk through the good and bad reasons for borrowing money as well as how interest works.
Loans There are a number of different loan options if we need to borrow money. Explore the impact that providing loan security has on the interest rate charged.
Loan Repayments Borrowing money can get people into trouble. Show children how to factor loan repayments into a budget and what to do if they can’t afford them.
Rent or Buy Most people would rather buy their own house than rent one. Introduce your children to the cost of houses in your area and city and use budgets to help them figure out whether they would be able to afford to buy or rent.
Mortgages It’s good to explain to children how mortgages work and how most people are able to purchase a home by saving for a deposit. If children learn the basics of property finance now it will improve their chances of being able to own their own property in the future.
Buying Property Buying a property is the biggest purchase many people make in their lives. Discuss the process with your children. If they learn the basics now they can approach the opportunity with more confidence as adults.
Rental Property Introduce children to the basics of earning money via owning a rental property.
Term Deposits Investing is a way of creating wealth without having to be paid to do something. Introduce term deposits and why they are better investments than regular savings accounts.
Property Investment Rental property ownership is a common form of investment in New Zealand and Australia. Explain why rental property is a medium return, medium risk investment.
Shares Owning shares is another common form of investment. Teach them the basics of earning money via owning shares.
Collectibles Collectibles are investments in rare items that (hopefully) will increase in value over time. These items include art, coins, stamps, antiques and cars. Although they can be fun to collect, it is a high risk/high return investment and students should get a good understanding of the risks involved.
Business Basics Businesses produce most of the products and many of the services we enjoy in the world today. Introduce different types of businesses and the jobs your child might expect to do if they work in one.
Marketing Marketing is telling customers about your product or service. Children should learn some simple tips on the best way to do this, then for fun they can make something to sell and market it.
Promotion, Selling, Price Promotion is how you get your marketing message to your customers. Teach them about advertising, loyalty programs, how to set a price and make a sale.
Profit and Loss A business’s profit is the reward for the effort given and the risk taken by it’s employees and owners. Explain how to prepare a simple profit and loss statement and what profit a business might expect as an acceptable return on investment.
Warranties and Cash Teach children what to do if the product they have purchased doesn’t work like it should or stops working altogether. Include a discussion on the ways they can keep their cash safe, both at home and overseas if they are lucky enough to travel.
Insurance Insurance helps protect us financially if things go wrong. Explain how insurance works, in particular House and Contents, Car, and Health insurance.
Online Security and Lotto It’s important to teach children about cyber security, particularly around spending money on Ecommerce sites and not sharing account/ password/ personal details with strangers. Also discuss the chances of getting rich through playing lotto or gambling.
Net Wealth Finally explain to children why they should save to invest and why they should invest to grow their net wealth. Also explain the importance of protecting their net wealth by diversifying their investments.
Neil Edmond is the owner of MoneyTime and HEA partner.
Neil is passionate about teaching all children the skills they need to become financially literate. This article was originally published on the MoneyTime website, and has been republished with permission.