Teaching children at any age about money is very important. Taking the time now will help set them up for successful money management in the future. We received tips from several financial experts who advise taking these steps when teaching children about money.
It’s never too early to start saving.
Though not usually on the baby registry, opening a savings account for a baby is a great investment. It could be a traditional savings account, a CD or even a 529 plan to start saving for education expenses.
“Start saving early because when you get older, you will have more financial freedom than others who didn’t.”
Have them earn their own money.
The value of a dollar earned is greater than money handed to them (except in birthday cards). Teaching young ones early about earning money is key to a good understanding of how income works. Based on age, you can set up a chore chart that allows your child to earn an allowance. Chores can range from helping around the house, to achieving in school to caring for pets or younger siblings.
“Having children earn money teaches them the value of their hard work.”
The next time your child sees something on TV or in the store and insists they need it, take the opportunity to show them how to set and work toward a goal to earn enough money to buy the item themselves. For younger children, the purchase price should be something that can be achieved in a short amount of time. Once the goal is met, have the child take their money and handle the transaction themselves.
“If they want to buy something, they should save their own money for it.”
If your child is older, start to teach them about the importance of saving over a period of time. If you set up a savings account for them when they were younger, take the time to explain why you did so, what it can be used for and how it’s grown over time.
“Help them understand the time value of money and why saving is important. A dollar saved and invested today will be worth more down the road compared to that same dollar not invested at that future point in time.”
Teach the importance of saving, spending and giving.
Learning that you should do more with your money than just spend it may be difficult for children to understand. But it is important for children to learn early that there are other ways to use money beyond spending and even saving.
“If a child earns an allowance each week for completion of chores, it’s important to show them how to divide that money into the 3 categories: save 1/3, spend 1/3, give 1/3. All three are equally important. You want them to be able to spend some of the money they worked hard to earn, but you also want to teach them about saving for the future and giving back to others who are less fortunate.”
A place to store their money.
Often, children learn by doing and seeing. For younger children, use a clear jar or piggy bank to store their money. They will be able to physically add their dollars and cents and see their money grow. For older children, consider opening a student account and teaching them how the process works. Allowing them to make deposits and keep track of their account through online banking services will be a starting point for future money management habits.
Talk about money... and fraud.
Having conversations about money and how it works can happen at any age. When you are purchasing groceries, talk with your child about the price of things and why you are purchasing some brands versus others. Allow your children to make mistakes with their money, and show them how to manage better in the future.
“Have real conversations with kids, and allow them to participate by earning money of their own and going through the discomfort when they don’t spend wisely.”
As children get older and start to have more independence with their money, it is important to discuss scams and how to safeguard against them.
“The one thing that we see rapidly increasing is young banking customers becoming scam victims. Fraudsters reach their targets with employment, marketing and sweetheart scams through social media. They quickly gain their victim’s trust and obtain their banking information. The victims of these types of scams usually lose $1,500-$2,000 before they even know what has happened. This is an area that is frequently overlooked.”
“Be smart with your money. Be diligent—teach them the importance of protecting your money by not sharing any personal information with anyone for any reason. Fraud is real and it happens daily.”
Set the example.
Lead your kids to financial well-being by practicing healthy money management yourself and involving them in the process as much as you can. Have the whole family participate in your routine budget meetings. Talk freely about your purchasing goals and how you are saving to be able to buy those items. Discuss your spending, saving and giving habits with your children and why each is important.
Teaching children at any age about money is very important. Taking the time now will help set them up for successful money management in the future.