Important Financial terms children need to learn made easy for
Do you know that handling your finances is considered a form of self-care? We all know that Self-care involves taking deliberate actions to improve your physical, emotional, and mental well-being, and managing your finances is an important aspect of this as well.
Good financial management can help reduce stress and anxiety, which can have a significant impact on your overall health and well-being. It can also help you feel more in control of your life and enable you to make better financial decisions that support your long-term goals.
Some examples of financial self-care include creating and sticking to a budget, saving for the future, paying off debt, and regularly reviewing your financial goals and progress. Additionally, seeking the advice of a financial professional can also be a form of self-care, as it can help you make informed decisions about your finances and reduce financial stress.
With all these things, don’t you think it’s important as a parent to start teaching your children early as well about financial literacy?
Teaching children about financial literacy from a young age is crucial because it can help set them up for long-term financial success. And as parents, that’s one of the many things we wish our children would be successful in the future as well.
Here are some basic terminology and examples that kids can understand.
1. Accounting
This is what you call when you keep track of where your money came from and where it goes, regardless if it’s a company/ business/ your own.
2. Accrual Accounting
It is the method of accounting that records transactions when they happen, not when the money is received or paid.
3. Cash Basis Accounting
It is the method of accounting that records transactions when the money is received or paid, not when they happen.
4. Income
This is the money you earn from doing work or selling something.
5. Expenses
This is the money you spend on things you need to run your company/business/finances.
6. Profit
This is the money you have left over after you subtract your expenses from your income.
7. Loss
This is when your expenses are more than your income.
8. Assets
These are the things you own that have value.
9. Liabilities
This is the money you owe to others.
10. Equity
This is the difference between your assets and liabilities.
11. Revenue
This is the total amount of money coming into your business.
12. Accounts payable
This is the money you owe to others for goods or services you’ve received but hasn’t paid for yet.
13. Accounts receivable
This is the money others owe you for goods or services you’ve provided but hasn’t been paid for yet.
14. Debits and Credits
This helps a company/ business/ individual make sure it has the right amount of money and things. These are also commonly called the two marks.
15. Income Statement
A financial statement that shows your revenue, expenses, and net income over a period of time.
16. Statement of Cash Flows
A financial statement that shows your revenue, expenses, and net income over a period of time.
17. General Ledger
When the company/ business/ individual buys or sells something, or pays or gets paid, it has to make two marks in its special book called the general ledger.
18. Balance Sheet
This is where you’ll see how much a company has, how much it owes, and how much is left for the company/ business/ yourself.
19. Charts of Accounts
This is the list of all the things it can put in its special book, and each thing has its own special number.
20. Cost Of Goods Sold
This is the cost of the materials used to make what you’re selling.
21. Operating Expenses
These are the costs of running your business, not including the cost of goods sold.
22. Gross Profit
This is the amount of money you have left over after subtracting the cost of goods sold from revenue.
23. Net Income
This is the amount of money you have left over after subtracting operating expenses from gross profit.
24. Depreciation
This is the decrease in the value of an asset over time.
25. Tax
Tax is money you pay to help the government do things like build roads, and schools to keep people safe.
Overall, teaching children about financial literacy is important because it helps them develop healthy financial habits and prepares them for a financially stable future.
How about you? When were you first educated about financial literacy? Do you agree that children should learn them as well while they are young?
