Tips to Teach Children How to Save and Spend
Learning about money is an essential step in a child’s education. Early comprehension empowers kids to develop good spending habits from an early age. Then, as they get older, they will utilize those tips and make smart financial choices for their own families. The complexities of money in our wireless world add further roadblocks to grasping financial basics. Learning denominations of money and even simple addition and subtraction can be tricky for kids. But don’t neglect to prepare them for the subtleties of mobile wallets, credit cards, debit cards, and in-app currencies). The earlier your children start learning about money, the better chance they have of being financially responsible. The following article from our friends at the Ohio Credit Union League will get you thinking about financial education for your kids, and provides 4 tips to get things started!
Learning About Money: Age-Appropriate Focus
Learning about money can begin early in elementary school. Before your child turns seven, they should already have a basic understanding of what money is and how it can be used. Even if you pay with a debit or credit card, explain to your kids that you’re using money to make purchases. Show your kids the receipt so they understand that your actions pay for monetary items. While they may not be ready to comprehend how interest works, help them to understand that a credit card is not an endless well of funds.
When your children get a little older, you can introduce them to saving. Create a short-term goal for your child, like a toy purchase, and see if they understand that every dollar saved can go towards that goal. This also helps your child learn about delayed gratification, and they will appreciate the purchase more because they worked hard to buy the item themselves.
Around the time your kids are gearing up for college, it’s a good idea to teach them about investing and how they can get the most back from their money. If they seem interested in investing, consider opening a custodial account with a brokerage like Charles Schwab, E*TRADE, Fidelity, or Stockpile. These companies can also guide your child toward the best possible investment opportunities. If that sounds daunting or they are looking for a more passive, easily accessible savings vehicle, consider a share certificate. Also, encourage your high school grads to consider what life is going to look like post graduation.
Learning About Money: 4 Tips for Spending & Saving
Learning what spending is and how to budget is arguably the most essential financial skill you can teach a child. Once children realize that purchases cost money and there is a limited amount of money to go around, they will start to learn about the importance of being financially responsible. Children must learn that to afford everything they need to survive, they must plan ahead and adjust their spending accordingly to anticipate unexpected circumstances.
2. Spending Activities
Young children can begin learning about money through an at-home store. Give your child a small amount of money and create a store with items of varying costs. This will help them realize that they cannot buy every single item at the store and that they will need to prioritize what they want the most. They can even save their funds to make larger purchases in the future. When they get older, you can even introduce spreadsheets or apps to help keep track of their spending.
Another important financial lesson for children to learn is saving. They need to learn that there is a difference between saving money in an abstract savings fund and saving money with a purpose. When kids start entering the workforce, they may choose to save a regular percentage of their income or a certain amount each paycheck. Consider matching their savings as an incentive.
4. Saving Activities
Help your child set an attainable savings goal and make sure the money being saved is expressed with a visual reminder. Consider having your child add money to a jar or color in a section on a whiteboard each time they achieve a new milestone. This visual representation is helping children start out so they can see that their money is being saved for a purpose. Another great way to teach your children about savings is to visit your local credit union and open a savings account for your child. Many credit unions offer financial programs designed for children (like our Sparky youth account and teen Ignite accounts). These offer additional tips and resources to guide and encourage your child as they are learning about money.