It is never too early to start teaching kids about money. The earlier they start learning about financial literacy, the better off they will be in the long run. There are a lot of financial concepts that adults take for granted, such as budgeting, credit, and investing. Unfortunately, most schools do not offer classes on personal finance, so it is up to the parents to teach their kids about money. If you are not sure where to start, don’t worry – we’ve got you covered. Keep reading for our top tips on teaching financial literacy to kids! Having a good understanding of saving, budgeting, and goal setting can make a huge difference in their lives as kids become young adults and embark on professional careers and financial independence.
Tips to Introduce Financial Concepts to Young Children
Start by giving them an allowance. Talk to them about saving some of it each week. Set a goal of something small that they might like to purchase and help them understand how long it will take by saving a certain amount each week. Put the savings in a piggy bank or other safe place for keeping where they can see it.
Use real-life examples. Take kids to the grocery store and show them the prices of items. Make comparisons and let them help decide which is the best value. If planning a party for your child, work through a simple budget together and explain how much pizza, cake, entertainment, and giveaways cost. Let them help make decisions on these items while staying within their budget.
Tips to Help Teens Manage Their Finances
When they are old enough to go to Starbucks or out to lunch with friends, give them a weekly allowance and explain how much those foods and drinks cost. Talk about how often they might be able to do this using the money they earn each week. Remind kids that they should always save some of their allowances.
Encourage them to work and earn money. They can babysit or be a mother’s helper at a fairly young age. As they mature, a part-time job at an establishment near home teaches valuable lessons. If they receive a paycheck, help them understand how to read the pay stub and how much their hourly pay becomes after tax deductions.
When kids begin driving, they should learn about the cost of gas and maintenance on the car, auto insurance, and the cost of the actual car. Even if they are not paying for all these expenses, they should understand the cost involved.
Kids may also be curious about the stock market and investing. If they have received a monetary gift, this may present the opportunity for them to try their hand at it. If they are under the age of 18, they will need help from a parent or guardian to open a joint brokerage or custodial account for them. The adult must open the account, select the investments, manage tax reporting, and continue to manage the account until the child reaches the age of majority which is usually at age 18.
Use technology. There are many apps that help track spending and create a budget. This is an interesting and relevant way for today’s teens to focus on finance.
Are your College Age Kids and Young Adults Financially Intelligent?
Have them pay some of their bills, even if it’s with your money. Transfer money to their account but set up bills for tuition, housing, and other expenses go to the student. Teach young adults to set up automatic debits for these expenses.
Emphasize the importance of credit. Credit is a crucial aspect of personal finance, and students need to understand how it works and how to use it responsibly. Teach kids about credit scores, interest rates, and the consequences of defaulting on credit card payments. Explain that they should not charge more than they can afford to pay off each month.
If purchasing an automobile, involve the young adult in the process of seeking the best price and negotiating. Put their name on the auto loan and make sure they understand the importance of making the payments.
Encourage goal setting and budgeting. Financial planning is much more effective when students have specific goals in mind. Encourage them to set short-term and long-term goals such as paying down student loans, the purchase of a car, or travel. Help them to set up a budget and check in with them periodically to make sure they are staying on track.
Provide resources for them to learn more. There are a wealth of books, podcasts, and online courses. Have them seek out the ones which interest them. You can read it or listen as well and have discussions.
Using Available Resources to Help with Financial Education
It is important to teach financial skills to children at a young age. They need to understand how to budget, save, and invest money. By teaching them these skills, we can help them make sound financial decisions later in life. If you are interested in learning more about how to teach financial skills to children, please contact us by clicking My Personal Bookkeeper by clicking HERE or by calling (847) 972-6822.
About the Author: Jackie Melinger
The youngest of three daughters, Jackie grew up in Skokie, IL, with the support and love of her parents, who were themselves, successful entrepreneurs and small business owners. They instilled great confidence, independence, and strength in Jackie, who attended the University of Illinois. There she met Michael Melinger, and the two quickly discovered that they would make a great team. Together they are fortunate to be parents to three busy daughters. Jackie also helped to care for her parents for many years, when they were no longer able to care for themselves. She has also been a devoted volunteer in her children’s schools and at North Suburban Synagogue Beth El in Highland Park. Working as a team, Jackie and Michael have built a successful eldercare business and were thrilled to acquire The Sprau Advocate Group (now known as My Personal Bookkeeper, Inc.) in October of 2018. Jackie met Kathy Sprau, founder of The Sprau Advocate Group, LLC, in 2003 and was quickly impressed with Kathy’s business model. Jackie was assisting her own parents with the demands of their healthcare paperwork, long-term care insurance, bill paying, and daily household management needs at the time, and understood firsthand the value Kathy’s service brought to others. Jackie has always managed the finances for her businesses as well as her household, and she has helped numerous family members and others with their budgeting and organization.