Financial literacy is having the knowledge necessary to manage personal finances efficiently.

Financially literate people know how to achieve long-term goals and make healthy financial decisions.

On the other hand, those who are not financially literate have difficulty applying financial decision-making skills to real-life situations. Not only do they tend to make unhealthy money decisions that create financial problems, they have trouble reaching financial milestones. In America today, financial illiteracy has become an epidemic. A study done by the Financial Industry Regulatory Authority Foundation estimated that nearly two-thirds of Americans can't pass a basic financial literacy test. That's a problem.

Whereas basic literacy is a priority for public educators, financial literacy is not.

Here is something you can be doing right now to raise financially literate children.

Teach your children to work hard.

Children need to understand the correlation between work and earnings from a young age. If your kids are actually doing the work, don't be apprehensive about paying them. Rewards motivate children, and money is an attractive reward. Allowing them to take on chores that they can get paid for not only teaches them the value of hard work but helps them learn how to manage their money and provides them with a feeling of accomplishment. If they don't do their work, don't pay them.

You can also cultivate their entrepreneurial spirit by encouraging them to offer babysitting, pet care, yard work or housecleaning services to friends, neighbors or relatives. Kids who work for pay can learn the cost in labor of an impulse purchase without monumental consequences. They can also learn the satisfaction of working hard to build savings and achieve goals.

Children who understand the value of hard work learn to be responsible for what they produce.

Holiday Giving and Activities

Children do not have to spend a lot of money to participate in the joys of creating and giving during the holiday season. See our Holiday Newsletter for Craft and Gift Ideas.