Financial Terms every child should know

October 8, 2020mommywithagoal@gmail.com

Can you believe that a person usually uses 7,000 words per day? How does this affect the person you communicate with like your child? I read once how words can influence a person’s life.

Are you using the right words when talking to your child? You might not notice but your children is always watching you. They are listening to the words you’re saying even if you feel they ignore you (hello teens!).

Do you use financial terms at home or while talking to your kids? This one subject has the ability to impact them throughout their entire lives, unforetunately, it’s a subject that no one wants to teach them.

It is practical to teach your children about this topic as they’ll actually use it for the rest of their life. Our society train us to leave teaching and children learning to schools yet there’s little taught of this subject. And it all falls to the responsibility of parents to fill that gap, no matter if they are realise it or not.

In a recent study, 72% of parents are reluctant to talking their kids about finance. The reason being that they don’t feel qualified or they think talking about money will make their children worry.

Does this study means parents don’t want their children to learn about finance? Nope! In fact, 91% of them believes that it’s appropriate for kids to learn about financial matters in school and 75% said there should be a personal finance requirement before they graduate. Even teachers agree on this with 89% saying that there should be a compulsory finance course with this yet only 29% of teachers are teaching it.

Here is a list of Financial terms that experts say every kid should learn.Take note of the term “LEARN”. Knowing how to read and spell the word is far different from knowing and having a deeper understanding on what it really means. And that’s the key every parent should take note on this as it is only when you fully understand that you’ll have the desire to apply it in real life.
INCOME

This is probably the most fundamental term that kids must know. Teach your kids the source (Where does money come from?). Tell them stories/scenarios on where you can get it and how you and your husband gets the money home. Have a fun chat with your kids about this.

Would you believe that some kids grow up still thinking that money grows on trees? Ridiculous right?!? I heard a story too that they know someone who taught their daddy goes to work and just reads the newspaper because that’s what they child see him bring to work every day. The daddy was a teacher.

EXPENSE

It is an amount of money someone spend to buy something or do something. This is the opposite of income where your money goes out of your pocket. Everything that one’s buy and requires payment with money is an expense.

SAVING 

It means not spending your money straight away, but putting it away so you can spend it later. Usually people put their savings in a bank account, to keep the money safe until they have enough to buy what they want. This is one of the easiest topics to introduce that even at a young age kids can grasp and have a huge impact. The moment you tell your child at a toy story that they can have that toy they wanted on their birthday or Christmas, you’ve already practiced delayed gratification.

BUDGET 

It is a plan on how you will spend the money you earn. It keeps track of your money and where it is going. One great way for parents to teach their kids how to budget is with “give, save, spend jars”

Personally, I love teaching this around when we do our grocery, that be whether online or visit the store itself. It will surprise you how much your children loves going there as much as you do. Of course except that in their mind, all they think was buying what they want while you try your very best to buy what you really just need to fit your budget.

Try asking for help with your kids finding the best priced item for a specific product, they may be of help too instead of the usual inconvenience who makes you go over your budget.

NEED vs WANT

A “need” is as an essential expense, such as food or housing. A “want” is an expense that would be nice to have but isn’t essential, such as designer clothing.

ATM (Automated teller machine/Cash machine)

It is a device that gives money that you’ve saved in your bank. This is an alternative way to have access to your money without going directly to your bank. It gives convenience to people to get money from places where banks aren’t around.

PIN NUMBER

It is your personal identification number. You pick your own PIN number, and use it to authenticate your identity for electronic transactions. It’s an extra layer of security and one shouldn’t share with other people.

DEBIT CARD

This plastic card connects directly to your bank account. You can pay with a debit card and pull funds directly from your bank account to make the purchase. This helps people feel secured going out without having to bring hefty amount of money in their pockets everyday. They are an alternative to paying with cash, physical checks, or credit cards.

CREDIT CARD

This plastic card issued by a financial institutions that people use for purchases. Credit cards allow you to make purchases up to a certain amount (your credit limit), and pay back that amount at a later date with interest. The financial institution, usually a bank, adds interest if people are not able to pay back the amount used for purchases within a month.

People usually use this to buy items like small purchases such as food, clothing and shoes or to medium purchases such as appliances and home decor.

INTEREST

There are two types of interest. First is the bad one where you need pay for use of someone else’s money; usually expressed as an annual rate in terms of a percent of the principal (the amount owed) Interest is the fee you pay for borrowing money. When you take out a loan, you’ll not only owe the loan amount back to the issuer – but also an additional percentage of money.

The other one is the good interest where you earn more for leaving your money in the bank. A perfect sample for this is the viral marshmallow challenge. An adult then asks them to wait for a period of time for them if they would want to have more.

DEBT

It is the money that a borrower owes to a lender. This is the what you get through the use of credit cards, mortgages, personal loans, and auto loans among others.

LOAN

It is a temporary provision of money (usually at interest). Most people use this for large purchases like buying a house or a car. Others may compare it to a credit card but as said earlier, used for bigger scale of purchases.

I’m sure most of your who reads this post learned about money from your parents whether it be by just watching them. Consider yourself lucky if your parents had an open mind teaching you. Now that it’s your turn as a parent, don’t let your own short coming be the same for your children. You have a choice now to change the pattern and raise Financially Literate kids. The question is, are you willing to do it?

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