Opinionated and Honest Journalist’s Take on Teaching Finances to Kids with 9 Top Tips
As a parent, it’s natural to want your child to have a bright future. One way to ensure their success is to teach them financial literacy from an early age. According to a study by Chase and OnePoll, 83 percent of parents wish they had learned more about finances growing up. However, it was found that 59 percent of parents feel uncomfortable talking about money with their children. As a parent myself, I understand the importance and difficulty in teaching finances to our kids. So, here are 9 top tips to help you successfully teach your kids about managing money.
1. Start teaching kids early
As the saying goes, “catch them young.” The best time to start teaching your children about finances is when they are young. According to Danna Jacobs of Legacy Care Wealth, children start identifying with financial scarcity and abundance at a very young age. So, it is essential to be open with young children about finances and guide them towards healthy habits. Jacobs suggests starting as young as three to six years old, giving them a small weekly allowance that’s equal to a dollar for each year of their age.
2. Help them learn to budget with money jars
Using money jars is an effective and practical way to teach your children about budgeting. When your child receives their allowance, they can allocate a portion to each jar based on their priorities. Essentially, these money jars teach kids a simple lesson in budgeting: they show how you can plan ahead by dividing money into categories. Jacob typically starts with three jars, labeled “goal” for spending, “grow” for saving, and “give” for charity.
3. Let them learn from experience
Instead of giving them orders, let your children learn from real-life money situations. Allowing children to experience the natural consequences of their actions is an effective way to teach them the value of money. As Tara Unverzagt of South Bay Financial Partners suggests, ‘fixing’ kids’ money problems delays their learning. Supporting their decisions and being with them in their painful moments is far more loving and helpful.
4. Set goals with your kids
Setting financial goals with your children is an excellent way to teach them about the importance of saving and budgeting. When setting financial goals with your kids, it’s important to make them achievable and measurable. Some goals that kids might save for include getting a toy or game, a special event like a birthday party or field trip, buying a phone, or college.
5. Consider using an app
Technology can be an asset in teaching money management. Using financial apps designed to help children learn about managing money, such as FamZoo and Greenlight. The apps allow parents to allocate allowances and monitor their kids’ spending. These apps also offer unique and engaging ways for children to learn financial lessons, such as Greenlight’s built-in money game called Level Up.
6. Open a youth savings account
A youth or kid’s savings account is designed for stashing away money, just like a standard saving account, but with lower minimum balances and fees. These accounts offer interest and can be a great way to teach kids the concept of “paying themselves first.”
7. Teach the difference between needs and wants
Another important financial lesson is distinguishing between needs and wants. By teaching your kids the value of saving for what they need, like food and clothing, they can prioritize their spending and budget accordingly.
8. Be a role model
Teaching kids about finances is not only about what you say but how you behave. As a parent, it’s vital to watch your own financial habits, as children often mimic what they see. Lead by example by managing your finances well and explaining your decisions to your children.
9. Make it fun
Lastly, make learning about finances fun. Helping your kids to learn through games, role-playing, and other creative activities makes learning enjoyable and helps them retain the information better.
– In a survey conducted by T. Rowe Price, 69% of parents admit they often avoid talking about money with their kids.
– PricewaterhouseCoopers conducted a survey that found 24% of millennials say they worry they will never be able to pay off their debt.
– A study by investment management firm Charles Schwab found that 18% of teenagers say they are “clueless” about money management, while 58% say they know only the basics.
Teaching kids finances early is essential to their future success. Parents can use practical ways like money jars, setting achievable goals, and teaching the difference between needs and wants. Parents should lead by example and consistently monitor their own finances while explaining their decisions to their kids. Integrating technology can also be an effective tool, but allowing children to learn from experience is also necessary. Lastly, making finances fun is essential to ensure kids retain the information learned.
Teaching finances to your kids can be a daunting task, but it is necessary for their future financial success. Starting young, using practical tools, being a role model, and making it fun are essential tips to consider when starting your kids on the path towards financial literacy. With these practices, you can help your children develop healthy financial habits that will serve them well throughout their lives.