Financial literacy can be a great tool to help you give your children real world examples of why they need to learn math. Financial literacy can be defined as having an awareness or knowledge about financial information, tools and resources and using these things to make personal financial decisions. Money is an everyday concept that most kids can grasp, so in addition to using discussions around money to strengthen their real-world math skills, it's also a great opportunity to begin to establish good money habits. Your child may not initially be excited about math, but money can be a gateway into helping him or her see math’s value. We will provide some topic suggestions for how to connect the importance of math through financial literacy, from elementary to high school.
Starting in elementary school, you may allow your child to start earning an allowance for completing household chores or tasks or for earning good grades. If you already have this or another monetary reward system in place, this can be a great way to begin to teach your child financial literacy and being responsible with the money they earn. Instead of just giving them money, consider assigning a dollar amount to certain tasks, or paying them a wage for hours worked to help them begin to see value in their time. At the end of each payment cycle, help your child calculate their earnings.
As our world becomes more digital, we begin to rely more and more on calculators on our phones or credit cards to solve basic math problems. However, cell phones lose connection and credit card machines go offline. The next time you’re dining out, show your child how you calculate a tip after a meal or how you make sure you receive the correct change when paying with cash. Or the next time you go shopping and find an item marked down on clearance, go over the receipt with your child to help them understand percentages. Reiterate to them that all these everyday occurrences require math skills.
If you have a high schooler who may be working or interested in working their first job, this is the perfect time to introduce them to financial literacy. Start before the first paycheck. We all remember the shock of seeing our take home pay versus what our paystubs say we made. Review the paystubs with them line by line, engaging them in conversation about each deduction and how gross pay versus their net pay is calculated. Have them calculate how much of withholding is taken out of each check.
If they don't already have one, take them to the bank or credit union to open a savings account. Help them understand the average amount of interest and how much they stand to earn based on their deposits. If your neighborhood branch is offering limited service due to COVID-19 help them research an online bank to partner with. If funds aren’t needed right away, online banks typically have better interest rates than your brick and mortar banks.
Many students have their first intro to credit card during high school, without receiving the proper education about how to use them properly. Before they sign up for a credit card, make sure your child understands words like, "interest", "annual interest rate", "principal" and “compound interest” and how each of these things are calculated. Not understanding the interest rate and how it is calculated can turn a small balance into a mountain of debt. Make sure they are properly educated. Although not quite as risky, it's also important to educate your child before allowing them to use a debit card as well, since overdraft fees can be a headache if the funds linked to the card are not handled responsibly.
Any money your child receives, whether it’s money for their birthday, a job or from the holiday, encourage your child to make a plan for their money in the form of a budget. It doesn’t have to be a formal spreadsheet with 100 income and expense categories, just something basic that tracks what is coming in and what is going out and will keep them accountable. This will also help your child understand the “opportunity cost” of spending. When you spend to purchase one item or activity, you give up the opportunity to spend the money on something else. This can help them learn to place value on what they really want, whether that is saving or spending.
Utilizing money knowledge to show the importance of math is a win-win situation. Not only are you encouraging your child's math abilities, you're also making them financially literate. To further strengthen their math muscles, give us a call at Mathnasium or send us an email for more information about our specialized instruction programs for children in grades 2-12.
