Empower Your Kids’ Financial Future
Teach kids about money early on may set them up for future success.
How do you raise your child to be confident with their finances? A good start could be simple lessons in working and earning money--it shows them how to contribute to the household and fill their piggy banks! Win win!
And what about spending their hard-earned money? Responsible saving and spending are life lessons that could be learned young… and they’re lessons that last a lifetime.
Building a solid understanding of money management practices and teaching your children basic financial literacy is something every parent should consider doing. Let’s take a look at what you could do to set your child up for success from a very early age.
Teaching your child financial literacy from an early age may demystify money and help them make smarter financial decisions when they get older.
Tailoring your lessons to your child’s age may help them understand what you’re teaching them and ensure that the lessons you impart stick.
Modeling good financial behaviors and talking about money openly as a family could help your child understand how the concepts you’re teaching them work in the real world.
Why Should You Teach Kids About Finances?
There’s a misconception that kids can’t understand how to manage money. According to John Rosenfeld, president of Jenius Bank, “Parents of young children and teens can teach their children that small actions today can create the opportunity for them to live a richer life tomorrow.”¹
When kids are young, they learn constantly. The more you expose them to good financial tips and money management strategies early on, the better prepared they may be once they start earning their own money. So, what does this mean in practice?
Talk to them about your successes, your mistakes, and how to take care of basics like opening a bank account or building their savings. It may prepare them for their financial futures far more effectively than you might think. This is especially true when you realize that your kids might not have anyone else to learn these lessons from.²
Only 23 states require a personal finance course as part of their high school curriculum and approximately 54% of teenagers feel unprepared to manage their finances after high school. That means you can’t rely on your child’s school to teach them smart money habits.
Tips for Teaching Kids About Money
Now that you understand the importance of normalizing conversations about money and teaching your child the basics of how to manage their finances, here are a few things to think about that could set your child up for success.
Tailor Your Teaching to Your Child’s Age
Kids in different age groups have different concerns and may benefit from different types of lessons.
For example, say you’re teaching a child under the age of seven about money. You may want to focus on smaller concepts like recognizing different coins and dollar bills or asking them to help you find items that are on sale at the store. These concepts may instill good shopping habits and help them understand how to save money on necessities.
But if you have a teenager, you may want to focus on more complex concepts like how to create a budget, especially if they’re getting their first job.³
Cultivate a Money Mindset
Creating a money mindset doesn’t mean encouraging your kids to obsess about money. It means building an awareness of how finances influence their daily lives and how they could use money responsibly.⁴
From an early age, teach your children about earning, saving, and donating money. You could start by giving them a small allowance in exchange for them keeping up with their assigned chores. Or you could help them make decisions on how to spend their birthday or holiday money. You may encourage them to donate some of their savings to charity and support causes and organizations that matter to them.
The key here is to help your kids understand that money is a tool and help them identify the difference between wants and needs from an early age. This may help instill the importance of responsible spending.
You may want to have conversations about the family’s finances and involve your children as appropriate. For example, if your car needs work, talk to them about how much the repairs may cost, why they’re necessary, and what that means for the rest of your budget for the month.
Discuss Financial Concepts Regularly
When it comes to making smart money moves, there are five principles of financial literacy that people should follow: earn, save and invest, protect, spend, and borrow. As your children get older, introduce them to these principles as you encounter them in your daily life.
Discuss how you and the rest of your family earn money. Talk about how you build a budget based off of what you earn. Explain how you set money aside, how you decide how much to save, and how that money earns interest. Explain how credit and debit cards work. Talk to your kids about debt and what it means to borrow money as you make purchases.
Honesty and a dose of age-appropriate reality may help kids understand the importance of money management. Of course, you may want to filter what you share about financial worries to spare your kids the stress—a focus on education helps here.
Help Set up Accounts
Though your child’s earliest experience with money may likely be in the form of cash, it’s still helpful to set them up with certain bank accounts that they could use as they grow.
Open a high-yield savings account so they’re able to see their money grow and a college savings account to help save for future education expenses. As they get older, you may want to set up a checking account that lets them get hands-on experience managing their money. Note that most banks require those under 18 to have an adult on the account as well.⁵
In all cases, make sure to explain each account and how it works. This may help them better understand why multiple accounts are necessary and how they could utilize those accounts to their fullest potential.⁶
Encourage Saving and Wealth Growth
The more involved you get your kids in their personal finances, the more they’re able to learn. If you know they want a specific toy or larger purchase, encourage them to set saving goals so they can buy that item themselves.
Break these goals into smaller steps so your child is able to monitor their progress. For example, say they’re trying to save $100 for a new video game. That $100 mark is the end goal, but you could set milestones along the way. Celebrate with your child when they save their first $5 or $10. Consider matching their savings up to a certain amount when they hit $20 or whatever milestone you deem appropriate. This may help keep your child motivated and encourage them to save more.
Teaching your child financial literacy is one of the greatest gifts you could give them. The sooner you start, the more well-equipped they may be to make smart financial decisions for the rest of their life.
Need to find a savings account to help build your child’s savings and teach them about money management? Open a savings account at Jenius Bank today.