Younger Children
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A 2013 University of Cambridge study stated that by the time children are just 7 years old, they have already formed money habits. While toddlers are still too young to be taught the value of money, it's never too early to introduce money and spending to them. Here are some great ways to introduce money to young children.
- Get them their first piggy bank. Clear piggy banks work best so that the child can visually see their money grow. If you would like to take it further, give your child two separate piggy banks—one for spending and one for saving.
- Encourage play money. While getting familiar with money is important at a young age, you don't necessarily want your child handling dirty money. Investing in a money play set and teaching money lessons through play is a great way to introduce money to children—because what toddler doesn't love to play store?
- Children learn by example, and setting a good financial example for your younger children to follow is important.
- Open a joint savings account with them. I am an avid believer in parents holding at least two types of saving vehicles for their children—one that the parent can fully control and one for the child to be on jointly. When the time is right for you and your child to open the account, make it a fun and exciting event for them. This is a great opportunity to get them familiar with banks and depositing money.
- Check for educational games and apps that have money learning games. Savings Spree is great for kids and well worth the $5 price.
Elementary/Middle School
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By now most children know financial basics, such as the different denominations, but keeping up with their financial learning at this stage in life can be crucial. Here are some tools and tips to help your child navigate through the beginning steps of learning what it means to control their own finances.
- Don't simply give your kids allowances—instead, teach them about earning money by assigning chores and rewards. iAllownce is a great resource and management tool to create chores, automated payouts, and rewards that can be synced to children's devices in your household.
- Gift your child a stock that has meaning to them. Giving a kid a piece of paper and telling them they own a share of stock isn't that exciting. But perhaps presenting it to them as they are now the proud owner of stock—and in turn, a part of the company itself—may be a little more satisfying, especially if it's coming from a company they are familiar with and has meaning to them (i.e. Disney). This is a great way to introduce kids into the world of investments and stocks.
- Teach lessons about value in goods and opportunity costs. If your child only has enough money to buy one of the two things they want, talk it over with them. Have them figure out the value of each item by comparing costs, longevity, and desire; this will show them that if they choose one thing, they can't have the other (the opportunity cost). Likewise, encouraging kids to think a purchase over for a day before making decisions instills strong values that will prevent them from making impulse buys as adults.
Teenagers/Young Adults
Do not depend on your child's school to teach them financial literacy, as less than half of states require high school students to take a personal finance course. High school years are the perfect time to develop your kid's financial freedom so they are prepared to make smart choices when out on their own.
- Let your child earn a paycheck other than a chore allowance, whether through a job or by pursuing their own business entrepreneurship such as an Etsy shop. Your child's first paycheck can be a great lesson on taxes.
- The most important thing you can teach your teen is how to keep a checkbook ledger, as well as how to fill out a check and a deposit slip. In my time working at a bank, the majority of teens and younger adults I encountered had almost no prior knowledge about basic banking transactions. While the argument against keeping up with such tasks is that banking is now mostly online, there is no direct way to keep exact track of your account balances without some sort of ledger entry. Card swipe and electronic transfers have become nearly instant ways of making transactions on checking accounts—but not everything instantly goes through your account.
- Help teens set long term savings goals and encourage them to always put a percentage of their income into savings. One great savings incentive is to set up a savings match with them. I once had a banking customer that told her children she would match whatever they put into their savings account by the time they graduated.
- Teach them healthy credit card habits. It's important for teenagers to learn the dangers of credit card spending, but I am an adamant believer that every parent should help their child get a first time credit card at the age of 18 to instill good credit habits.
- Help them create a budget. Sit down with them and together figure out their monthly income. If they have any monthly expenses (gas, cell phone, etc.) subtract that from their monthly income to figure out how much money they have left for spending and saving.
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