The growing numbers of foreclosures and debts amongst Millennials are indicators of financial instability. They demonstrate that knowledge about managing money isn’t as common as it should be. To ensure the next generation avoids this problem, teach your children about money and financial management at an early age.
Teaching kids about money is essential for helping them become responsible adults when they grow up. Not all schools teach financial skills to children. Being parents, it’s your duty to ensure they have this knowledge. Here are 6 ways to give your children some valuable financial lessons.
Help your children understand the value of money with various activities and lessons. It won’t be easy, but it’s worth it for a better future for them. Start it today by gifting them a piggy bank.
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As parents at one time or another we have all asked ourselves “How do I teach my child the value of money?”. Teaching teens about money is one of the lessons on the top of the long list of lessons we have to teach them. But, as we all know there is no parent handbook given at the birth of our children. So, the question of how to teach your kids to save money is for us to figure out. Great… lol These Eight Ways To Teach Your Kid To Save Money will definitely help with this task. Eight Ways to Teach Your Kids To Save Money! One of the most important aspects when you’re building your own wealth and working towards a more secure financial foundation, is saving money. However, a lot of us have yet to learn the importance of saving. Many people learn by trial and error while others learn from their own experiences and the experiences of others. We may experience trouble managing our savings as adults, but, one thing we don’t want is for our kids to struggle in the same way. The good news is that according to MoneyCrashers: 60% of American parents are teaching their kids how to budget money by letting them handle their allowance. Meal Planning Can Save Your Life The bad news is that according to MoneyCrashers: only 1% of these kids save their allowance money. As a parent, we want to teach them the value of money. Since saving is a habit that takes time to build, the younger your child is, the better it is to teach him or her how to handle their own finances. If you are a parent and you want your children to learn how to save money, here are the 8 simple ways to teach your kids to save. Discuss Needs VS Wants The first step to teaching your child the value of saving is to know the difference between wants and needs. Show some examples: The needs include the basic ones such as food, clothing, shelter, and school while the wants are all the extras. You may also use your own family budget as an example to illustrate how you are spending the family budget. Explain how your family’s wants should take a back seat when it comes to spending for your family’s needs. Start With The BasicsRemember the trusty piggy bank? A piggy bank is a great way to teach your kids the importance of saving. Tell your child that their goal is to fill up the piggy bank until there is no more room. Tell them that the more they save, the more their money will grow. Open Up A Bank AccountOnce their piggy banks are heavy and full, assist your child in opening up a savings account. Let them count how much money they are going to deposit and let them understand how much they already have. Make sure to get a passbook (there are even some great apps you can use for that) for them to keep track of their money as it grows. Seeing the numbers grow as the months pass will be a huge motivation for your child that his or her money will grow if they continue to add to it. Let Them Earn For Their OwnDid you know, according to PRNewswire: that 68% of parents said that they are paying their children an allowance for doing household chores? If you want your children to become wise savers, making them work for their own money can make them feel motivated. They will appreciate it more if it is earned rather than just given. Offer extra money in exchange for washing dishes, sweeping the house, or making their beds. They’re not only learning the value of hard work, they are also learning to keep the money they worked hard for and spend it more wisely. Set GoalsFor a child, saving without knowing why may be pointless. Letting your children define their savings goal is a better way to get them motivated. If they know what they want to save for, you can help them break down their goals into manageable pieces. If your child wants to buy a $100 toy, they should save $10 allowance every week. Let them know how to figure out how long it will take them to reach their goal and how much they should save. Give Savings IncentiveIf your child is trying to save $100 for the new video game they want, offer to match every dollar that they save. You can also offer a reward for savings milestones: Give a $50 bonus for hitting the halfway mark and another $100 for making it to the $100 goal. Be The Best ExampleIf you want your children to become money savers, you should be one yourself. According to a recent survey, 17% of parents said that they don’t have savings for their future retirement, for emergencies, or even for college expenses. Get your own emergency fund in shape. Set aside 30% of your monthly salary in a bank account. Once your child knows how successful you are at saving, it will encourage them to follow in your footsteps. Teach Them To Track Spending Another part of being a better saver is to know where their money is going. Once your child receives his or her allowance for the week, have them write down all the purchases they make with it. Let them add up everything at the end of the week. Encouraging your children to know how they are spending and how fast they will be able to reach their goal will change and improve their spending habits. Teaching your child the value of saving money may be challenging, but, you are instilling something they will help them become more self sufficient adults. From introducing the concept of money to making their first investment, here's a roadmap to guide you through the process of teaching kids about money.
In a 2018 National Financial Capability Study, 58% of respondents said they were never offered a financial education by a school, college or workplace. This means that the majority of us learn how to manage our money at home from the people we trust most. Teaching teens money can have a lasting impact on a their life. These seemingly small lessons will help them when they need to budget during college, save for a honeymoon and prepare for retirement. We share the lessons you’ll need to teach kids to save money so your child can go into the world as a savvy saver. Start with a savings goal For kids, time, money and savings can be hard concepts to understand. A visualization and short-term savings goals can help bring these concepts to light. Together, pick an item or experience to work toward. (Studies show that we are happier when we spend money on group activities rather than a physical item. It may require some creativity, but see if you can brainstorm some fun experiences.) Make the process fun by hanging up a picture of the goal and tracking the progress with a chart. Congratulate your child on every step toward their goal so the process is fun. Move from piggy bank to bank account When we think of saving our money, many of us think of the iconic piggy bank. However, many experts recommend a different take on the classic. So, where should kids save their money? Start with stashing your kids’ savings in a clear jar. This way, they can see their hard work add up. Then, around age 7, move those funds to a kids savings account. “Try opening a digital savings account so kids can see their hard work add up quickly via a mobile app,” said Sarah Hussain, product manager of deposit products at Alliant Credit Union. Opening a savings account can be a big day for your child. Here are some steps to get you started:
A well-planned allowance Allowances are a debated strategy among the parent blogs, but this monetary tool can be impactful. Many of the financial pros argue against an allowance not tied to work. Instead, they recommend implementing a regular allowance attached to specific chores. “Before you start a program, consider the details of the allowance strategy so that the rules and methods are consistent. The stronger the plan, the more you can focus on why you’ve set up the allowance: teaching your children about how to save money,” said Hussain. A savvy income plan If you don’t want to implement an allowance plan in your household, help your child come up with some savvy business ideas. There are many opportunities for young entrepreneurs including the classic lemonade stand, mowing lawns or even gardening for neighbors and friends. Help your child with a simple marketing plan and pricing their services. Not only will your child make some extra money, but they’ll also learn a little about how a business works. Discuss spending on wants vs. needs Good savings habits will help your child live below their means. Create a budget for kids who might be spending a bit more. By creating a budget, you can help them understand how to spend on the essentials, like food, back-to-school supplies, gas and clothing. When it comes to the remaining cash, you can discuss avoiding impulse buys and how to prioritize savings goals. Let your kids make mistakesI know, you’re thinking, “that’s easier said than done!” Hear me out. We’ve all purchased something we regret, whether it was a treadmill we thought we’d use more or an investment that was too good to be true in hindsight. Now is a great time for your child to make mistakes because the stakes are low. If your child wants to spend their hard-earned money on a short-lived gimmicky toy, let them buy it. Once they realize their purchase mistake, ask them what they’ve learned and how they can do better. Next time, should they research the product more? How can they remind themselves of their larger goals? What do they enjoy spending money on? Hopefully, when they spend their savings in the future, they’ll spend a little smarter. Talk about money with your children Throughout this exercise with your kids, reflect on your own saving and spending. If you want to do better, share that with your children and how you plan to improve. If you accomplish a savings goal, let your kids see your excitement and pride! Honesty and transparency will help both you and your kids grow. If this conversation doesn’t come naturally to you, don’t worry about it! You’re not alone. In T. Rowe Price’s 11th Annual Parents, Kids & Money Survey, 50% of parents said they are reluctant to discuss money or financial topics with their kids. Here are some tips to help the conversation get rolling:
Be a good exampleAs with anything, your kids will follow your example. If you don’t have an emergency savings account yet, create a strategy to start an emergency fund. If you have a chunk of debt you want to conquer, cut a few expenses and follow a plan for that too. Your children will see your hard work and will hopefully follow in your footsteps. Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor. Most kids love money: whether that’s playing shop with pretend coins, counting out their pocket money or the allowance you transfer into their accounts as they get older. They also love to spend it - whether that's their own money or yours! But are we forgetting teaching kids about money ? How to invest for your kidsIn honour of Teach Your Children to Save Day, here's some help to make it easier for you to teach them how to save for themselves. Savings and investment may seem complicated, but passing on your wisdom now will give them a brighter financial future... Give them pocket moneyLetting them take charge of their own money is important, so that means giving them some! You do need to be consistent - after all, they can’t budget or work towards a savings goals if they don’t know what they are going to get and how often. You could also think about giving them extra money for chores – although it's good to teach them that most household jobs should be done as a family and not for pocket money, some things, such as cleaning the car, might merit a bit of extra cash. Talk about it‘Talk about the reason you go to work, what earning money means, and what different things cost', advises Richard Stone, chief executive of The Share Centre. ‘You can even talk about investing – tell your children you own a little bit of the companies you shop in every day to spark their interest or point out famous companies which are doing well or badly. How to talk about money? If they want to buy something, talk them through what chores they did to earn that money, what they will have left and what else they can do to earn it. If they still want to splash their cash, let them. They may love what they buy and if they don’t they’ll soon learn the useful art of budgeting! Use tech We all know kids love bright lights and devices, so use ipads, phones and apps to your advantage! There are kid-friendly apps, like GoHenry, where they can see their balance grow and what chores they have to complete to get their pocket money, or try Rooster Money that allows children to learn how and when to spend, save, give and grow their money. Let them watch If you move your money into a savings account or ISA automatically then your child will only see you doing the spending! Teach them there’s more to money by letting them watch you save – whether that’s a digital transfer or saving your coins in a jar. If you have an account for them, let them see their money grow with your contributions and interest rates. They might be more convinced to put it away if they can see where it goes and what happens to it! Use other toolsInitiatives exist to help kick-start your kids financial education. Try Discover Fortunes, a game available in schools or online that aims to provide financial education to young people. The Your Money Matters book is also a great resource - it's the first financial education textbook to exist. How do most kids learn to excel at the important things in life? Education and practice are the main ingredients. Yet most kids don’t learn enough of what it takes to manage their money from childhood and beyond. In fact, in December of 2019, The National Financial Educators Council (NFEC) asked nearly 7,000 teens and young adults (aged 15-18) across all 50 states to respond to a test measuring their current personal finance knowledge. This 30-question quiz assessed respondents' capability to earn, save, and grow wealth. According to the results, the average level of money management for children knowledge among the sample was 64.9%. Luckily, awareness of this issue is on the rise, and high school students in 21 states must now take a personal finance course to graduate. When young people understand how to manage money, they are equipped with a skill that is key to making their dreams a reality. April is Financial Literacy Month In 2000, The Jump$tart Coalition for Personal Financial Literacy dubbed April as Financial Literacy Month. During the nationwide collaborative effort organizations across the country conduct a variety of events and carry out initiatives designed to improve financial literacy, especially among our nation’s youth, and to promote financial well-being for all consumers. Why is financial literacy important?Financial literacy is key to understanding how to save, earn, borrow, invest, and protect your money wisely. It is also essential to developing short- and long-term financial habits and skills that lead to greater financial well-being. Now, more than ever At least 72% of students say personal finance stresses them out and the current world health crisis cause by COVID-19 could put an added financial burden on many young people. Now more than ever, students need education and resources to help them understand how to make it through these difficult financial times. DoSomething.org is doing just that. Something. The largest organization for young people and social change launched "Would You Rather?", a nationwide financial literacy campaign that teaches young people how to make and save money, while social distancing during COVID-19 Through "Would You Rather?", young people are invited to answer five amusing financial questions. Questions like: To save money, would you rather... a) Share a cellphone with your grandma? or b) Share a closet with your ex? (A. Definitely A for us) Upon completing each question, test-takers receive a personal finance tip along with comprehensive digital personal finance guides. You can take that quiz here. Let the (financial literacy) games begin.While not new, gamification has become an increasingly popular and legitimate way to teach students of all ages useful skills and concepts. For something like money education that can be dry and dull if taught in another format, it can be a lifesaver. There's a big difference between which financial literacy lessons are valuable to a 5-year-old than a 15-year-old. To make the best financial literacy games for your kids easy to pinpoint, below are suggestions, divided by age group. Before you can focus on more complicated concepts like saving and investments, kids have to learn the basic concepts of what money is and what different bills and coins are worth. Here are five more game suggestions for your little money-mavens:
High school and beyond
We can't forget the grown-ups Let's be real. Financial literacy learning isn't just for kids. We 'kids at heart' could always use a refresher on topics like managing debt, using credit cards, and protecting your identity. We've rounded up a few great places to start your extra-curricular learning. 1. Invest in You: Money 101 - CBNC offers this 8-week learning course to financial freedom for free and that's not even the best part. It's delivered directly to your inbox weekly. Talk about barely having to lift a finger. 2. Money Basics - Smart About Money's Money Basics courses help you to form a healthy financial foundation for the rest of your personal finance journey. Each course takes approximately 45 minutes to complete and includes valuable tools and resources including worksheets, calculators and quizzes. Financial literacy in your local communityFinancial institutions are huge supporters of financial literacy in their communities. Community banks and credit unions are uniquely positioned to step in and provide resources to the most vulnerable (underbanked, underserved, and disenfranchised) among us. Keep an eye out for CFI-hosted contests, workshops, school deposit days, fairs and other programs aimed at improving student savvy when it comes to money matters. How are you participating in Financial Literacy Month this April? If you've got something special planned in honor of this month of learning, we want to hear about it. Did you come up with a game to play with your kids? Are you enrolled in a personal finance course? Let us know by dropping us a line at [email protected] or you can always 'slide into our DMs' as the cool kids say. The parents of a child who has begged for the latest Lego spaceship, or merchandise from Disney’s Frozen film, probably won’t have uttered the words “delayed gratification” in their response. However, such terms could become a valuable tool in teaching teens about money. Most parents excel when it comes to teaching safety and good manners, but with money few know where to start. Money skills can be a blind spot because so many feel financially inept themselves. Yet research suggests parents’ behaviour is the biggest influence. “As a society in Britain, we don’t talk about money – it’s a sort of massive taboo,” says clinical psychologist Dr Elizabeth Kilbey. “Unlike other parts of parenthood, there is no playground chatter about the topic and, as a result, parents revert to what they know – passing their habits down to children.” So how do you teach your children to be financially astute and, eventually, independent? Lesson 1 Start early Teach them well – and early – says the government-backed Money Advice Service. Its research suggests that adult money habits are set by the age of seven. But financial lessons must be age appropriate to resonate, says Kilbey: “Young children are not miniature adults. Lessons should be tailored for their age, rather than just made simpler.” Start as soon as they are able to count and make money the topic of regular family discussions. Time these around dates when they are due to receive a cash gift so that you can talk about saving versus spending. Lesson 2 Want versus need While your child will naturally ask for the latest games console, making them understand the difference between needs and wants will help them make sensible spending decisions from a very young age. One way to do this is to put it into a context that your child can understand, says Kilbey. “If they want the latest Star Wars Lego set that costs nearly £300, explain how long it would take an adult to earn that amount of money.” She suggests creating a specific example to put it into perspective. How many hours would a teacher, for instance, have to work to pay for that item? “This demonstrates delayed gratification which is an important part of learning about money.” It is OK to say no. As adults we are often told no, and children need to hear it Advertisement Parents should reinforce through words and actions that it’s important not to spend more money than you have. One good way is to keep the just-for-fun purchases in check by not giving in to every request. “It is OK to say no,” says Kilbey. “As adults we are often told no, whether it is from employers or the bank, and children need to hear it.” However, experts warn against saying you can’t afford it. It’s easy to use this default response when your child begs you for the latest toy. But doing so sends the message that you’re not in control of your money, which can be scary – and create future anxieties. Kilbey suggest that a more appropriate way is to say: “We choose not to spend our money like that.” Separate money into different piles. Lesson 3 Know the difference It is crucial you show your children that money can play a variety of roles in their daily living, whether it is spending today, or saving for tomorrow. Advertisement Providing pocket money in lower denominations makes it easier to allocate a proportion of income to different goals. Labelled jars work to separate money – one for saving, one for spending, and one for donating. Any time they make money by doing chores or receiving birthday gifts, encourage your child to divide the cash equally among their jars. It’s not a huge act, but it does show that it’s OK to spend some, money, as long as you’re giving back to others and saving as well. Once they’re older, their bank accounts can mirror the split. Lesson 4 Learn from mistakes When kids have their own money, it is essential that they make choices and deal with the consequences of their actions. By experiencing negative consequences first hand, they will learn to make smarter financial decisions. “Let them take responsibility for small amounts,” says Kilbey. “Allow them to make mistakes. It really is the best way to learn.” Lesson 5 Make it relevant Enable children to experience using money on a practical level to experience the emotional highs and lows. “First, they must save it, then spend it, then experience the euphoria that comes from buying the item they wanted, but also what it feels like to lose some money in the process. This will reinforce the idea that it must then be saved again.” Use the weekly food shop to talk about planning, saving and finding the best value AdvertisementOne way to teach children how to handle money is through routine tasks and household chores. Use the weekly food shop to talk about planning, saving and finding the best value. Let your children hold the list and tick off each item or, if they’re older, give them a few items from the list to find on their own at the best price.” Using actual cash is important. “It’s only once they have grasped ‘real’ money can you move on to the more difficult concept of virtual or digital money,” Kilbey explains. When your children are very young, work money concepts into their imaginary games, such as playing pretend store or restaurant. However, Kilbey suggests avoiding play money: “Parents should role play with real money and model the importance of giving it the care and attention it deserves. “Store it properly at the end of the game, as it will show that it needs to be looked after.” Lesson 6 Lead by example Parents have a great deal of influence on their children, and it is not just the positive messages that resonate. Children tend to copy what we do rather than what we say, so limit the amount of shopping trips as a leisure activity, as they might start to think that money is an unlimited resource and that spending is fun. What’s more, research suggests that a third of parents lie about money. Studies show this will only send the wrong message. They may learn that lying is a good way to cover up financial problems, or that lying about money is acceptable. If your child asks a financial question that you’re not comfortable answering, be honest and say you don’t want to talk about it. STARTING POINT If you are a parent who won’t hand over any cash until your offspring have earned it, you are in the majority. Halifax research has found that around two thirds (65%) of children aged between eight and 15 are doing some form of household chores to earn their pocket money. So when do you start paying? Dr Elizabeth Kilbey suggests a weekly amount during infant school then spaced out to fortnightly or monthly by the time they are finishing secondary school. “There has to be some sense of the real world, and pocket money is a good way to do that as it teaches short- and long-term saving and good spending habits,” she says. The average weekly amount given to children between the ages of eight and 15 is £6.35, according to Halifax. Teaching Teens About Money will help them develop good habits for the future.
Here are a number of helpful tips to help parents show children how to make smart money decisions: Giving young children pocket moneyThe relationship between needs and wants is an important concept for children to understand. Teaching a child about managing money at an early age will help them understand the difference between needs and wants and should make future conversations about money easier. Pocket money can be a good way to start. It doesn’t have to be much as long as you have set out the rules in advance as to how much is involved and on what basis it is given for example, is it earned? It is important to remain consistent with these rules. Then discuss with the child how they plan to spend their money. A great way to help children get started and learn how to budget is to have three jars with the following labels:
Open a savings accountIt is a good idea to help your child to open a children’s account. Banks, credit unions and post offices offer children’s accounts and you can open one with as little as €1. Children’s accounts are usually easy to use and don’t have no charges. Once the account is opened, you can encourage your child to lodge money from their savings jars into their account each week. Reward young children’s money saving effortsIt’s natural that children may lose interest in saving their money or become frustrated when they want to buy something straight away without having enough saved. You could encourage them to continue saving by agreeing to match the amount they have saved for a couple of weeks to help them reach their goal. Every year in the U.S. millions of teens graduate from high school with absolutely no knowledge surround basic finance. I guess this explains why we (the U.S.) rank 14th globally when it comes to financial education for kids. So why in the world would we not be teaching our kids about the one thing they will use everyday – MONEY?
Back in the day when I went to school (during in the 70’s), I remember spending at least half a school year learning about finance and world economics. There was even time spent studying the stock market by making fake investments and following their trends. While the classes weren’t easy, I can honestly say the basics I learned have served me time and time again. Too bad my daughter, who graduates in two months, won’t have the same opportunity. Now I could make this piece about the lack of education on the single most important subject our kids should be learning, but it wouldn’t change a thing. Changes won’t happen until funding is tied to the results. Instead, I want to focus on what parents should be doing to fill the big hole in our kids’ brains when it comes to earning, saving, sharing, spending and investing money. So here are some basics terms your kids need to understand before taking on the real world. Let’s be clear, they will still make mistakes and bad choices, but heck, no one is perfect. You can teach someone to ride a bike but they still might crash, right? However, I promise if you drive home these following points, your child will have a fighting chance to not being back living with you at the age of 30.
This is just the tip of the iceberg, but it’s exactly the reason why our children should be learning this in school. My one article won’t solve the problem, but maybe someday our schools will decide that preparing kids for real life is better than just passing them along in subjects they will never use again. Your child may be years away from leaving home, but the time to start teaching grown-up life skills is now. From how to teach money management for children, these life lessons will help your tweens and teens become successful (and happy!) functioning adults later in life.
The secrets to a successful life don’t always come exclusively from a school classroom. Some of the most important life lessons are passed down from parent to child. Use our guide to help enable and empower your children with the information and resources they need to graduate to adulthood with confidence. Life Tip 1: How to Keep House When to teach: Ages 5-7 Key teaching tool 1: Tackling basic chores. Life lesson plan: Establish two specific, daily chores. For example, at the age of five, kids can put toys away or help set the table. Key teaching tool 2: Understanding that doing chores come with positive results. Life lesson plan: Let them watch and help you. Then let them complete tasks on their own. Praise a job well done. If a chore is done incorrectly, suggest a trick that will help correct the problem for next time. Helpful parenting tip: Set up a "star chart" reward system, awarding a star for a week's worth of successfully completed chores. Stars are redeemed for money, privileges, or other rewards. Apply previously agreed-upon consequences if chores aren't done. Life Tip 2: Maintaining Good Health When to teach: Ages 10-17 Key teaching tool: Set a good example for your child and provide opportunities for him or her to start taking an active role in their health and fitness. Life lesson plan:
Key teaching tool: A pre-college visit to the doctor explaining routine concerns. Life lesson plan:
Life Tip 3: How to Avoid Risky Behavior When to teach: Ages 10-17 Key teaching tool: Role playing. Life lesson plan: Help your child brainstorm options for getting herself out of scary situations safely. Don't stop until you're satisfied she knows what to do, and work in brush-up sessions on occasion and before events. Have her act out these situations:
Life Tip 4: How to Manage Money When to teach: Ages 11-13 Key teaching tool: A savings account. Life lesson plan: Set up a meeting with your child and a bank manager to discuss the difference between savings and checking accounts, monthly charges, fines, and interest rates. When to teach: Ages 14 and up Key teaching tool: A part-time job (including babysitting, dog walking, or other odd jobs). Life lesson plan:
Life Tip 5: How to Ask for Help When to teach: Age 12 Key teaching tool: Open, honest, ongoing communication. Life lesson plan:
As any parent knows, getting children to focus can be challenging - even more so when it comes to teaching money management for children.
But comics are kid-friendly, and the New York Federal Reserve is using them to teach financial principles that baffle even adults. “We’re not trying to create junior economists here,” said Anand Marri, who directs outreach programs at the New York branch of the U.S. central bank. “Our job is to promote economic literacy, so we can have a citizenry that understands the economic forces affecting people’s lives. These comics are a vehicle for that.” Marri’s team unearthed a treasure trove of material from the 1950s and updated them for a new generation. The first comic, “Once Upon a Dime,” released in 2017, is set in the planet Novus, whose fast-growing economy is driving its residents to adopt monetary systems for the easy exchange of goods and services. This year’s sequel, “The Story of the Federal Reserve System,” may not have the most exciting title, but is drama-filled as a financial crisis forces the aliens to travel to Earth to study our central banks for solutions. A third comic, due out in the first quarter, tackles how central banks tweak interest rates, by lowering them to stimulate lending and growth, or raising them to stem inflation. More comics may come, depending on the response, Marri said. The comics can be downloaded on the New York Fed website (here). Hard copies may be sent, free of charge, to teachers for classrooms. So far 70,000 digital and hard copies have been distributed. “Tools like comic books are great because they get a conversation started and piques kids’ interest, and sometimes that’s the hardest part,” said Laura Levine, president and chief executive of the Jump$tart Coalition, a Washington nonprofit that promotes youth financial literacy. Marvel Entertainment and credit-card company Visa partnered in 2016 to release one such comic, titled “Rocket’s Powerful Plan.” In it, characters from the popular Guardians of the Galaxy franchise discussed everyday money issues like saving, spending and budgeting. FEEDBACK Kids I talked to were impressed with the imaginative way the comics explained a subject they usually find boring. Using aliens to tell the story was a wise choice, my 12-year-old Zach said. “That’s the type of stuff kids are into.” He enjoyed the trivia such as the tons of gold stashed in vaults below Manhattan, and what the tiny numbers on a dollar bill mean. Zach does not, however, see any Marvel-like movie potential in the comics, which he said were too dense in parts. “A battle would have made it better,” he said. The comic-book format makes the material much more interesting than a textbook, Aidan Wohl, 13, said. But he questioned narrative choices such as having an alien explain central banking through song. In the end, Aidan was not fully convinced that central banks are a foolproof solution to any planet’s economic crisis. “Maybe 80 percent.” Teach Your Kids About Money in 4 Steps
Rachel Gottlieb has worked in wealth management since 2002, but her most poignant money memory wasn’t of the financial crisis or the market meltdown late last year. It was when she was 10 years old. Her mother gave her $10 to buy ice cream with her friends. When she got home and her mom asked for the change, “I’d lost it,” recalls Gottlieb, a certified financial advisor with UBS Global Wealth Management in New York. Gottlieb’s mother explained the value of the dollar, even pointing out that, because of taxes, she actually had to earn more than $10 to keep that amount. “My mom and I had plans for the two of us to go to a restaurant for dinner that evening, and I was really looking forward to it,” she says. “She canceled our dinner and instead made me a peanut butter and jelly sandwich.” It’s a lesson that has stuck with Gottlieb. Now a 39-year-old mother of two, ages 8 and 5, she seizes opportunities to instill good habits and knowledge in her own kids. When the tooth fairy deposits money under a pillow, it raises the question of whether to spend, save, invest, or give it to charity. A trip to Disney World leads to a conversation about owning shares in the theme park’s owner, Walt Disney. Driving over the Triborough Bridge in New York sparks a discussion about bonds, which helped finance its construction more than 80 years ago. “OK, that might be a little over the top,” Gottlieb admits with a laugh. But maybe not. Kids can begin to conceptualize money around the time they’re in preschool. Though money is a less taboo topic now than it once was, teaching key concepts about it might be harder today, in a world of what Gottlieb calls “invisible money.” Even pulling out a credit or debit card seems quaint when consumers can flash their phones to pay at the checkout or buy something in their social media feed with one click. While the economy is, by some measures, robust, many young adults say that money problems cause constant stress; consumer debt is increasing faster than household income, and an astounding 36% of millennials—people now 23 to 38 years old—surveyed by Schwab have no savings for emergencies. If ever there was a time for parents to talk with their kids about money and instill good financial habits, it’s now. “As they say, small kids, small problems; big kids, big problems,” says Gottlieb, who works with multigenerational clients. There’s no single playbook for what, when, and how to teach kids about money—your circumstances and the child’s personality are part of the equation—but one tactic is universal: “Parents should use milestones in their kids’ lives to sit down and have a conversation,” advises Tim Ranzetta, founder of Next Gen Personal Finance, a nonprofit that provides educators with free resources to teach personal finance. When your tween lands a babysitting gig, talk about saving. If your 16-year-old is on the verge of getting a driver’s license, discuss insurance. As college decisions come into focus, make tuition, student debt, and career plans front and center. Here’s how parents (and grandparents) can set up kids for good money habits: Early Childhood: Teaching by Example Just as children develop language skills by hearing words, they develop ideas about money by listening to, and watching, their parents. “They are little sponges taking in how you make decisions related to money,” says Scott Rick, an associate professor of marketing at the University of Michigan and father of three young kids. In a recent study, Rick and fellow researchers found that children as young as 5 had distinct emotional responses to spending and saving money, suggesting that people are prewired to be spendthrifts or savers. This isn’t to say spendthrifts are doomed to making bad decisions or that savers will be misers. “Parents can help kids recognize the emotions around money and help them adjust their behaviors,” Rick says. The best place to start is by giving youngsters a window on spending and saving. Routine outings to the grocery store, for example, present a great opportunity to talk about the basics: Money is a limited resource; things cost money, and every spending decision comes with a trade-off. As kids get a little older and have their own cash, parents should let them make decisions about what to do with it, even if it leads to mistakes. “Let them regret a purchase every now and then, and sit with that feeling,” Rick advises. Parents can also introduce the concepts of budgeting and goal-setting. “If your kid tends to be a spender, you can nudge them to save by offering to make a matching contribution,” says Gottlieb, who recently published a children’s book, Zac’s Dollar Dilemma. Most kids today are digital natives, but cash is king in the early years. “It’s easier to learn about money with physical dollars and coins,” says Robert Westley, a member of the Financial Literacy Commission of the American Institute of CPAs, or AICPA. So skip the latest app and go with the tried-and-true strategy of Mason jars earmarked for spending, saving, and giving. Tweens and Early Teens: Practice Makes Perfect Young children start to understand the difference between needs and wants, but this takes on real weight when they enter middle school and what they want costs more than a candy bar. Cellphones, soccer fees, and expensive sneakers make money lessons very tangible. Here’s where the training wheels should come off. Regardless of how great your means are, don’t give your kids carte blanche for routine expenses. Instead, devise a budget and come up with an allowance. When Daniel Wiener’s daughter was a teen, he had her manage most of her discretionary expenses, from birthday gifts to movie tickets. “We had a Crisco can in my office we called the ‘personal ATM,’ ” says Wiener, chairman of Adviser Investments, a Newton, Mass., wealth management firm. He deposited his daughter’s allowance monthly. She made withdrawals as needed, though she had to meet annual savings and charitable goals, or get a lower allowance the following year. The jury is still out on whether kids should have to work for their allowance. Some say that the only real way to appreciate the value of a dollar is to earn it; others argue that it’s more important to teach youngsters to be accountable for their spending. “But the bigger point is that kids need to practice managing their own money and that often means giving them an allowance,” says Ranzetta. Experts emphatically agree on two points: First, the allowance should be paid monthly or even quarterly, so that the recipient must make it last. Second, parents should outline clear parameters about what’s covered by the money—and not cave in if it’s spent quickly and the child pleads for more. This stage usually calls for a debit card, prepaid credit card, or electronic-payment option, such as Venmo. Parents shouldn’t blow this opportunity to teach lessons about reading the fine print, spotting hidden fees, and ultimately deciding how to handle transactions. When it comes to overdraft protection, “My advice to parents is, don’t do it,” Ranzetta says. Not only are the fees steep, but also overdraft features shelter youngsters from an experience they might never forget—having their attempted payment declined. Teens to Pre-College: Holding Them Accountable This is when life milestones--teaching kids about money matters—come in rapid succession. For many teenagers, it starts with getting a driver’s license, use of a car, or possibly their own vehicle. “This is an ideal time to introduce the concept of insurance,” Ranzetta says. Premiums and deductibles don’t make for titillating conversation, but if getting the car keys is predicated on understanding them, kids will listen. Parents should help their teens update their budget—or create one if they haven’t done so already—and encourage them to use their new mobility to make extra money. When they start to earn a real paycheck, drive home the value of saving and introduce basic concepts of investing, including the value of diversification and tax-advantaged accounts. Financial advisor Patti Brennan, CEO of Key Financial in West Chester, Pa., made initial contributions to investment accounts for her four children. She helped them choose a diversified mutual fund, but then let them buy stocks after they explained their decisions. “They saw how difficult it is to own individual stocks,” says Brennan, who recalls that one of her kids chose shares of now-bankrupt Toys “R” Us. As with savings, parents can offer to sweeten the deal. Wiener matched contributions to his children’s Roth individual retirement accounts when they got their first summer jobs. “They could work for three months and double their money, as long as they saved it,” he says. “Not even Warren Buffett can make that kind of return.” College and Early Career: Preparing to Launch Decisions made during this stretch can have lasting financial implications, whether related to student debt, career prospects, parents’ financial goals, or all of the above. “Parents should start these conversations early before they and their kids make decisions that will follow them around for quite some time,” says AICPA’s Westley. College money conversations should include costs, budgeting, and desired outcome. Assuming your child has managed money in high school, the financial transition might not be too jarring in the freshman and sophomore years, thanks to student housing and campus meal plans. Upperclassmen often move off-campus—or have internships that require living on their own—and that opens doors for conversations about rent and utilities, budgeting for food, and earning money. In any case, “once you’re 18 years old, you can start making some serious financial decisions, and bad decisions can start mounting up pretty quickly,” Westley warns. While student loans loom large, credit-card debt can be the bigger concern. In a recent survey of 30,000 college students at 440 institutions, 36% said they already owe more than $1,000 on their credit cards. Brennan incorporates personal-finance advice in a college internship program at her firm. She uses mornings for education and afternoons for “grunt work,” noting that the latter is important for developing young professionals to be productive members of a team and society. That’s good advice for parents pondering how to help their kids enter the adult world. In a recent study of 18-to-29-year-olds by Pew Research Center, 45% of respondents said that they had received financial help from their parents in the preceding 12 months. With housing costs in many cities high, it’s not uncommon for parents to offer support when their kids leave college. Brennan maintains, “we have to help them take ownership of their finances.” In most cases, the best approach is to help a recent graduate go through her budget and offer to fill the gap—for necessities, not luxuries. And parents should specify how much will be provided, how long the help will last, and for what purposes it can be used. You may be wondering why in the world does my child need financial education for kids? If my role as a parent includes earning money and making sure my child is provided for, then how much value can it be?
Children are interested in money; they see you making purchases and overhear you discussing finances and they intuitively understand the power money holds. If the importance of earning money and saving is not conveyed at a young age they may pick up their money management habits from other disreputable sources; such as from school friends, movies, and the government. Financial literacy is, according to Investopedia, “the ability to use knowledge and skills to make effective and informed money management decisions”. It is not a subject or even a topic that is formally taught in schools so the onus falls on you, the parent. Of course, you don’t have to go and try to explain the intricacies of expansionary fiscal policy to your five-year-old, but a basic understanding of the worth of money and how it works goes a long way. If you ensure your child is properly equipped with an understanding of money, you not only set them up to be a financially responsible adult but also instill important skills at a young age. Financial literacy can also improve skill areas unrelated to money such as informed decision-making, patience, and organisation. It may be your instinct to shelter your child from the harsh realities of the adult world but by arming them with the necessary skills you’re investing in a less stressful and more successful economic future for them. As if the kids haven’t already been home enough lately, now many parents are stuck with them at home for this new school year.
If your kids are virtual schooling and you’re panicking, wondering “How will I work, run the house, make sure schoolwork is completed, and entertain the kids all day every day?” Take a deep breath. First, you can do this! Next, consider ways to use the extra time together to teach them valuable life lessons. For instance, there has never been a better time to teach your kids about money than while they are stuck at home doing virtual school. Yes, you have a lot going on. But, there are easy ways to how to teach kids about money after the schoolwork is completed. Plus, you can have fun doing it on the weekends, such as playing Monopoly or running a lemonade stand. Not only is it easy and fun to teach your kids about money, but it is also a way to ensure their future success (i.e., moving out of your house and living independently). Beth Kobliner, a finance author who specializes in money lessons for children, says, “The sooner parents start taking advantage of everyday teachable money moments […] the better off our kids will be. Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers.”¹ Our kids need us to teach them financial literacy because no one else will. According to a study by the student loan education website Nitro, “Only 16.4 percent of U.S. high school students are required to take a personal finance course” and “84 percent of [millennial survey] respondents agreed that high school didn’t prepare them to handle their money. Teach your kids about money before they leave the house, or they run the risk of making the same financial mistakes you fear (and possibly wind up stuck with you forever). Read on for 17 easy ways to teach your kids about money. #1 Stress the Big 3: Saving, Giving, and Spending Teach your kids the big 3: saving, giving, and spending. And, ideally, teach the big 3 as soon as you begin to talk about money with them. In addition to setting savings goals with your kids, look for ways to make this concept more tangible. For example, use the 3 separate piggy bank system, with each category having its own piggy bank. Whenever kids get money, they are taught to put a percentage of money in each of the three piggy banks. #2 Play Pretend If you have preschoolers, play pretend to teach them about money. Kids love pretending to shop and pay for their food at little cash registers–and it’s why children’s museums have pretend grocery stores and banks. You don’t have to take your kid to a children’s museum to play pretend. Purchase a toy cash register with some pretend cash and coins, and let your child shop around your house. #3 Make It Visual One issue with teaching kids about money in 2020 is that many parents do not use cash. As a result, kids rarely get to see cash transactions. That’s why it is a good idea to get clear jars for your kids’ piggy banks. This way they can see the money add up. Also, if you take your kids with you to the grocery or pharmacy, shop using cash so they can see that cash does have a limit…and runs out. #4 Let Them Run an Old-Fashioned Lemonade Stand Young kids love running old-fashioned lemonade stands because they get to act like adults. It’s also a fun and memorable way to teach financial literacy. #5 Point Out Costs A simple way to raise your child’s financial awareness is to point out the cost of merchandise. For example, teach your child how to compare prices of generic and brand food items in the grocery store. Or, point out that the price of the bigger box of LEGOs costs more than the smaller one. #6 Discuss Opportunity Costs Kiddle explains, “Opportunity cost is the value of the next best thing you give up whenever you make a decision. For kids, this is often a difficult concept to comprehend–and why it’s so important to discuss opportunity costs with your kids. For example, they need to learn that if they blow all their birthday money on something frivolous, they will miss out on a better spending opportunity in the future. #7 Allow Them to Earn Money For kids to become financially literate, they need money. But, don’t just give them money. That simply reinforces the idea that money is infinite. Instead, let them earn an allowance. According to The Balance, “When kids receive an allowance they must learn very basic budgeting and rationing skills. As they manage their allowance money, their money management skills will improve.” #8 Get Them a Debit Card If you want to teach your kids about money but rarely have cash on hand, consider getting them a kid-friendly debit card. For example, the Greenlight debit card is designed to be used by kids while managed by their parents. The Greenlight debit card is connected to the parent’s bank account. You can set up allowance funds to be transferred to your kid’s debit card. The debit card automatically deposits the funds into savings, giving, and spending according to the percentages parents set. Kids use an app to see how much money they have in their account (and on their debit card), and parents receive notifications for the cost and place of purchases. There is no minimum age for a Greenlight debit card, and parents with kids as young as 5 have reported success using it. #9 Play Games Games are one of the most simple and fun ways to teach your kids about money. If you play games like Monopoly and Life with your kids, you are already making them financially aware. In addition to the classic board games, there are also computer games and apps, like Practical Money Skill’s Cash Puzzler and Peter Pig’s Money Counter. #10 Have Them Do Price Comparisons With all the technology available, it is easy to comparison shop. Teach your kids how to make price comparisons when you (or they) are shopping so they don’t overspend. Have older kids do price comparisons when you are planning a family vacation. It will be eye-opening for them to compare the prices of different hotels and plane flights as they search for the best deal for your family. Take it a step further and make a game out of price comparison shopping. You don’t need to go into a store–you can do it online. #11 Review Their Purchases with Them When it comes to teaching kids how to spend their money, it is a good idea to hold on to receipts. After a few weeks, pull out the receipts with your child to review their purchases. Ask them if they are still enjoying their purchase or if they regret spending the money. This is a great way to teach them to differentiate between instant gratification and value when it comes to spending money. #12 Bring Them into the Conversation Too often, parents shield their kids from conversations involving money. But kids learn financial literacy from hearing their parents talk about money. Consider discussing your budget or why you are saving with them. Let them talk to you about how your family can afford the things they love, such as sports, streaming services, and vacations. #13 Use Real Numbers Rather than giving kids vague lectures about spending money, use specific examples and real numbers to drive the point home. Instead of saying, “You’ll have to save for a long time to afford that car,” break down the payments for them. Show them the true cost of purchasing and owning a vehicle. #14 Request Cash for Gifts Consider asking family and friends to give your kids cash for gifts instead of toys. In addition to keeping clutter at bay, this will allow your kids to make their own financial choices. #15 Teach Teens the Basics Before They Move Out As mentioned earlier, most teens are not taught financial literacy in high school. Therefore, it is up to parents to teach their teens the basics before they move out. This means setting them up with a bank account, teaching them how to balance a checkbook, set a budget, and pay their bills on time. #16 Show Them Online Bill Pay Systems With so many people using automatic bill pay systems, kids don’t see their parents writing checks for bills and putting them in the mail. An easy and effective way to show your kids where your money goes is to let them sit with you while you pay your bills online. Many kids don’t even realize you have to pay for utilities. Not only will this be an eye-opener, but it will teach them to pay bills like a responsible adult. #17 Let Them Make Mistakes Lastly, let your kids make mistakes. And suffer the consequences. If they blow all their money for a month in the first week, don’t give them more. But do explain that if they were out in the real world, this would be a real problem. When it comes to parenting, there are certain things that people stress about teaching their children: potty training; riding bikes; long division and fractions; driving; and money! Once your children enter into high school, it’s time to have some serious lessons with them about all aspects of money.
It can be a daunting task to adults because, let’s face it, just because we are adults doesn’t mean we have it all together in this department. Our hope as parents is that each generation will do better than the last. So, let’s start preparing the next generation to be smart with their money by sharing some of these tips and guiding them in the right direction – who knows, some of it just might stick! It’s all about the budget. Does your tween or teen get money as gifts or an allowance and want to blow it all on the latest craze or on a night out with friends? Teach them how to create a budget now so that they can continue to live within their means in the future. They’ll be adults and out of the house in the blink of an eye so set them up for success now. Have a meeting with your kid and show them how to create a budget that they can live within. The important thing here is to keep in mind you are here to guide them and introduce them to living on a budget, you are not here to create it for them. It’s very important that they be able to see the process and understand the reasoning behind allocating funds in certain categories. Ask them to jot down their expenses so they can see in black and white where their money is going. Teach them that they have a certain amount that gets rationed out for bills and other monthly expenses. Then you can help them set aside a certain amount in savings and then break down the rest into fun things they wish to do, like go to the movies, the mall, get their nails done, etc. Set goals. Has your teen had their eye on a big-ticket item? Often at this age, they dream of having their own car or the latest video game system. Those are both big expenses in their own right. Instead of you shelling out your hard-earned cash for those items, encourage your teen to set a savings goal and budget accordingly. They will need to determine how quickly they want to reach their goal and then figure out how much they should save each week to do so. This can be a hard thing for teens but with if they are in the right mindset, they will do it. Explain the dangers of borrowing money. Whether your teen just turned 18 and wants to apply for their own credit card or if your teen is asking to borrow money from you to buy something they have their heart set on, this is the perfect time to talk about the dangers of borrowing money. It might be nice to get their hands on something they desire right away thanks to a credit card but explain how much that item would cost by the time they paid back their debt. It’s easy to have that short-lived happiness cause years of financial stress and strain. The same goes for borrowing money from a loved one – don’t do it! The weight on your shoulders of having the pay them back can quickly make seeing this person a nightmare. Your teen may feel guilt, shame, and/or be embarrassed that they had to borrow money in the first place. They also may avoid seeing the person they borrowed from if they are taking longer to pay back the loan than they anticipated. Lastly, the relationship may be permanently damaged if they fail to pay back the full amount because the person who loaned the money may feel taken advantage of. It is simply a lose-lose situation and is best to be avoided. Responsibly handling money will get your child very far in life (and will keep them from returning to the nest!). Money can be a delicate so its better to focus on providing financial education for kids , to set them up and get them going in the right direction now versus when they are just starting to get their hands on money versus when they are middle-aged and are caught in a pickle. Handling money responsibly translates into being responsible in other areas of their life. Start young and you won’t regret it! Imagine if all your income was disposable, and you had very few responsibilities. It would be a real challenge to develop the disciplines required for long-term financial health. This is where a lot of teens start when they’re introduced to money.
As parents, it’s our job to focus on teaching money management for children. Our teens are going to make some mistakes. But if we’re paying attention, we can help them make mid-course corrections and keep them on track. Let’s look at four mistakes teens make when managing their finances. Spending too much on special events When it comes to events like concerts or sporting events, kids feel a social pressure similar to adults. Parents can help teens negotiate their spending on these events, showing them how to get deals and create a special evening that’s within their means. It’s also an excellent opportunity to talk to them about financial peer pressure. There will always be a temptation to make financial decisions in an attempt to impress friends and families. The earlier we can help them recognize this tendency, the better. Not putting money into savings Some kids are natural savers, but all kids need to learn to put money away. Unfortunately, a lot of kids will spend it as fast as it comes in. Teens practice spending habits that they’ll carry into adulthood—so if they don’t learn to put money away when they’re young, they may struggle to make a habit out of it when they’re older. Need a youth savings account that you can monitor together? Delaying understanding credit Parents aren’t typically thinking about their teen’s credit, which could eventually be a bit of a problem. Believe it or not, in a few years when they actually need good credit to rent an apartment or buy a car, they may not have it yet. At minimum, teach them how credit works. But before going out and opening a credit card in your teen’s name, try a safer approach with a debit card. This will give them practice using a card responsibly, a skill they can use later to build their credit. And with the right debit card, you can also control the spending limits and monitor spending habits. Looking for a teen debit card that you can control? Carrying cash Carrying cash can make it easy to spend, lose, or loan money—and after it’s gone, there’s no real record of where it went. We live in an age when everything from music to banking is digital, and our teens needs to be prepared. They should know how to monitor their account from an app, make mobile person-to-person payments, use a debit card, and digitally deposit checks. That way, the cashless world won’t be a big puzzle to them later. TEACH THEM ABOUT SAVING FIRST BY OFFERING AN INCENTIVE TO DO SO.
If your teen is not old enough for a job, ask them to save a portion of their birthday and holiday money that they get. It doesn’t have to be a lot. Try a small percentage like 10%. Up the ante by matching what they save. LOOK TO YOUR LOCAL BANKS AND CREDIT UNIONS FOR HELP. A lot of times, they offer teen and preteen accounts that have high-interest rates on savings accounts and even offer fun events and classes for tweens and teens to learn about budgeting. This is also a good time to help your teen figure out how to compare banks and their rates. LEAD BY EXAMPLE. Most teens are old enough to be able to pick up on casual decisions you make as an adult member of the household. Involves them in casual conversations about what you are budgeting for. Show them how you balance your bills or create a family budget. You could even have older teens come up with a grocery budget for the month, for example. TAKE OPPORTUNITIES THAT PRESENT THEMSELVES AS TEACHING POINTS. For example, let’s say your teen wants some new clothes. Show them just how much they can save by shopping at outlets, thrift stores, and so on. Give them a budget and allow them to choose their own clothing (within reason of course) with this budget. Discuss how choosing to splurge on one item may mean skimping on another. This real-life scenario is something they can relate to and helps them understand why you need to be smart with your funds. TALK ABOUT BEING SMART WITH IDENTITY STUFF. It’s one thing that is semi-new in the world of teaching budgeting, but can be a real concern; identity theft. Part of teaching your teens about budgeting should include a talk about keeping things like social security numbers and bank pin numbers and passwords safe. Talk about what could happen down the road if they don’t. HELP YOUR TEEN SET UP A BUDGET FOR THEIR OWN THINGS. If your teen is old enough to take on part-time employment and you want them to, encourage it. If you would prefer to stick with an allowance set-up, that’s OK, too. Either way, help your teen to develop a budget for their usual monthly expenses from eating out with friends, to entertainment, car payments or insurance, gas, and clothes. Seeing it all on paper can help your teen get better at tracking where their money goes. Are you focusing on financial education for kids? What are some ways you teach yours about spending wisely? Let me know in the comments. |
AuthorHi! I am Tim Connolly and I am providing help to parents to bring up their children in a healthy environment. I am working in this profession from last 5 years, if you have any query regarding this please contact me. Archives
June 2021
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