Financial literacy is a life course all children should take. Unfortunately, it's not taught in schools, and many parents don't put enough emphasis on the topic until it's too late. Topics like debt-to-income ratios, taxes, insurance, investing, and charity often fall by the wayside while living life. 

If you ask many hard-working parents why they work so hard, they'll likely tell you that they want their children to have a better life than they themselves had. However, one of the most logical steps we can take as parents is teaching our children innovative steps to financial freedom. 

Sometimes money lessons are ones we fail to pass on; other times, they are lessons we need first to learn ourselves. If you're struggling with financial wellness or don't know how to start sharing financial wisdom with your children, we're here to share some of our favorite tips to help you get started. 

1. The Value of a Dollar

When I was little, my dad would always give us an allowance for doing chores around the house and yard. Anything extra we did to help clean up or help my mother earned a reward. Earning an allowance quickly teaches children the value of hard work and the value of a dollar earned. 

However, in today's world, a dollar doesn't go nearly as far as it did when I could buy penny candy from the local grocer. Today, a dollar is worth about what ten cents was then, so you have to earn ten times the amount to make a dollar worth an actual dollar. Teaching children just how expensive the cost of living is can help them understand that money is not something to be frivolous with. 

2. Inflation Impact

You can tie the impact of inflation to the value of a dollar. When you explain how inflation makes items more expensive, it shows children why it takes so much money to pay for basic necessities. This, in turn, helps them understand how fortunate they are when they get that special birthday or Christmas present because money doesn't come cheap anymore. 

The impact of inflation quickly hits wallets, especially where food and gasoline (or transportation) are concerned. Helping your family understand why you had to scale back your vacation or why they had to skip a favorite activity can go a long way in smoothing out misunderstandings and hurt feelings. 

3. Investing Basics

When you explain investing basics to your family, you can empower them to make positive money decisions. Instead of blowing their weekend cash on a movie or concert, they may choose to set it aside for a car downpayment or some other large purchase they want to make. 

Be prepared to help them understand investing in real terms and transactions. Teens may be especially interested in stashing their hard-earned cash in an investment portfolio. The more you can help them understand the risk and reward structure, the more informed they'll be about where they want to put their money. 

4. Pay it Forward

If you've ever seen the smile on a child's face when they give something away that makes someone smile, you know the feeling is priceless. Teaching children the value of giving is essential to building a solid financial outlook for your family. 

Making “just enough” is a reality for a lot of folks. But if you make “more than enough,” consider helping your kids understand the value of giving by picking a charity you donate to as a family. We only rise together, and it takes everyone doing what they can. 

5. Credit Score Results

Credit scores can be very useful in helping your family understand their financial wellness. Helping children understand what credit scores mean, why there are three reporting agencies, and how scores can go up and down is important. It helps them understand how debt works, how it can affect their financial future, and why keeping a solid credit score is crucial to financial success.

It might not be a comfortable conversation if your credit scores aren't great, but it's necessary if you're going to set your children up for financial freedom as they grow into adulthood. Start them on the right path, and you'll give them one of the best benefits of financial literacy.  

6. Delayed Gratification

Teaching children the pros of waiting for something they really want is a lesson that will serve them for a lifetime. Children often want things instantly, with little knowledge of why and how waiting can help them. 

Teaching them why waiting is important can show them that they may save money and time if they wait for what they want. They may also start to realize they didn't want that item quite as much as they thought. It also gives manufacturers time to work out kinks that may otherwise mar the purchase of an item they want to buy. Delayed gratification may be one of the most important financial tools you ever give your family for their financial toolbox. 

7. Shop by Comparison

Comparison shopping is a hidden gem in financial literacy. This simple, teachable skill can help your children reduce their expenses and get more for their money. By showing your children the value of comparison shopping, they can combat that “keeping up with the Joneses” mentality that often plagues people. 

Instead of thinking they need a pair of Nikes simply because of the Nike brand, they'll see the value of a pair of New Balance trainers. Or your child may see the sense in purchasing a car that's a few years old with good mileage over that brand-new model that will devalue the minute it leaves the lot. 

8. Debt Disasters

I heard someone say once that a credit card is just another term for “debt.” If children don't know how to properly manage credit, they can easily fall into the trap of a “buy now, pay later” mentality that will only set them up for financial failure. 

Showing children about credit, how it can be beneficial to an overall financial landscape, and how it can go south quickly is an essential skill. Show them early, show them often, and teach them the advantages of a good credit policy. 

9. Compound Interest Benefits

The benefits of compound interest, especially when it comes to investing, can't be overlooked when teaching your family about avenues to save money. Compound interest happens when you reinvest the interest you earn on your savings. This builds up and increases your interest earnings. 

Over a lifetime, compound interest on savings can easily help you double your savings, and the more you add, the more you'll end up with more in the end. If you're teaching your children about retirement savings, compound interest is a great tool to help them. 

10. Building Emergency Cash

One of the first and most important principles to teach your family when discussing financial success is why and how to build an emergency fund. We all have emergencies, and being prepared for those unexpected occurrences is crucial to keeping your finances in a positive position. 

Help your family understand the concept of an emergency fund by showing them examples of bills that you won't be able to pay if you lose your job. You could also use a needed repair like a new roof to show them why emergency funds are so critical. 

11. Budgeting for Beginners

One area I always wished my parents had taught me more about is budgeting. As an impulse spender, I find budgeting has helped me greatly curb my spending, distinguish between wants and needs, and learn the joys of saving. 

If you only teach one concept to your family, let it be budgeting. It can truly set them up for financial freedom as they enter adulthood, and it is a huge stepping stone in the direction of learning how to properly manage money.  

12. Needs Vs. Wants

A big part of budgeting is helping children understand the difference between wants and needs. The very nature of children is to think that they have to have everything they want the minute they want it. They can't separate the two, and helping them learn how is a valuable lesson they will use for the rest of their lives. 

Often, adults can deal with issues of separating needs from wants. Curbing your impulse to splurge on wants will also help show your children that needs like shelter, clothing, and food must come before items like games, activities, and trips that might not be necessary. 

13. The Importance of Taxes

No one likes taxes, but showing your children the importance of paying taxes, lessons on how and why the IRS (Internal Revenue Service) exists, and why we pay taxes on our income can help them understand why the IRS collects a portion of each paycheck. 

It's also important to explain the tax system for people who are self-employed or own a business as a co-founder. These tax structures are different, and learning as much as you can about them is vital to ensuring that you pay your taxes properly.