According to a study by the National Foundation for Credit Counseling, only 40 percent of adults have a budget and keep track of their finances. The lack of understanding and awareness of money could be rubbing off on the next generation, with more than half of 15-year-olds scoring on the low side of a test on spending and saving. It is important to teach financial literacy to children from an early age. Here are some tips to help.
Teach Your Kids About Money
April is National Financial Literacy Month, a great time to instill a lifelong understanding of good spending and saving habits.
- Discuss the difference between wants and needs. Explain that things like food, shelter, clothing, medicine, hygiene, transportation and other basics are needs. Many other things, such as televisions, video games and entertainment, are wants. Use your own budget to explain how you spend money on housing, car, bills, etc. before you can consider spending money on things you may want.
- Have children earn their own money. Having children do tasks around the house in exchange for money teaches them the value of hard work. If they do not complete their chores, they do not get paid. Children are more likely to save money when they earn it.
- Provide a place to save. For younger children, this could be a piggy bank but as they grow, consider opening a savings account. This allows them to see their progress, especially if they are saving for something specific.
- Track spending. Part of effectively saving money is understanding where the money you are spending is going. Having children write down their purchases and add them up at the end of a week or a month can be eye-opening.
- Act as their creditor. A good way to teach children early on about loans is to lend them money with a payback plan from their allowance with interest. This teaches them that if they had saved on their own and waited, the item would have cost less.
- Leave room for mistakes. Part of putting kids in control of their own finances is letting them make missteps. It can be tempting to steer them away from a costly mistake, but it will be far more memorable if they learn from their mistakes rather than receive a lecture from their parents.
- Talk about money. One study found 44 percent of parents said they had never talked to their children about long-term investing. Teaching your kids about money and saving should be an ongoing discussion that becomes more complex as they age and can better understand the process.
- Set a good example. Showing your children your good saving and spending habits is important and will rub off on them. Discuss your retirement savings plans, your emergency fund or how you save for family vacations.
How We Can Help
We are committed to helping children learn the value of money. You set up a checking or savings account in their name, allowing them to start learning the process with you by their side. Or join our Moola Kids’ Club, a program designed just for children.
We regularly hold events geared towards teaching children to navigate the financial world. To stay up to date on all of our financial literacy events, follow us on Facebook!