5 Ways to Teach Kids about Money
One of the most important aspects of anyone’s life skills is to learn how to manage money. While traditional schooling may teach children to identify coin values and count cash, it’s up to us as parents to teach behaviors around spending, saving and overall management of money.
The truth is, as with any area of life, if you don’t teach your kids about money, others will. And how they handle finances may not be what you deem appropriate or fiscally responsible. Don’t take that risk! See our easy-to-adopt ways to teach kids about money below.
Help Their Money-Making Decisions Be Clear.
Who doesn’t love a nostalgic and adorable piggy bank? Or perhaps one of their favorite cartoon characters doubling as a hollow saving buddy with a slot for allowance and birthday money? It can be tempting to opt for something cute or consistent with your kid’s bedroom theme. However, when it comes to managing funds, your child will benefit from seeing their progress.
Choose to simplify savings and spending with a clear jar. As their jar funds increase, they can literally see their money grow. When it comes to spending that same cash (provided you give them the opportunity to pull from it) they can feel the emotion of what it means to witness a decrease in funds.
Teach kids about money by having them window shop before they spend.
You can do this in one of two ways. Either they can bring a set amount of money with them to the store, knowing that they cannot exceed that budget, or you can entice them to window shop for what they are interested in and return to the store with available funds to cover it at a later date. They can even head home to see if options exist online for less cost!
This gives them time to think about whether they really want to pull from their jar. Or determine if it was a possible impulse desire that passed the moment they left the toy aisle. Beyond that, they will also learn about taxes and how what is posted as a sales price doesn’t always match what is owed at the register.
Let them earn their money.
A very common term associated with giving children money is known as an allowance. The definition of an allowance is to give someone a sum of money regularly. This can be a great practice for kids who can consistently perform “chores” or meet any expectations you’ve set on how they’d earn their allowance.
However, the term “commission” is becoming increasingly popular in households. The definition loosely translates to an amount of money, typically a set percentage of the value involved, paid to a person performing a task. Using commissions gives your children the opportunity to pick from a variety of tasks, at monetary values you have set. This way, they are choosing to perform the chore and learn that some tasks are more lucrative than others.
Give them the responsibility of a bank account.
If your kids’ funds have outgrown the clear jar, a bank account is also a viable option. You should be able to set them up with a simple bank account where access is easy via phone app or computer. This takes money management to the next level. So, it is important to show them how to access their accounts while also explaining withdrawals and deposits. Despite how important it is to balance a checkbook or understand the use of a debit card, it isn’t something taught in most school curriculums.
In an increasingly cashless society and a tech-savvy world your kids have grown to operate in, it’s only natural to teach them the way off digital deposits and wireless withdrawals. What’s great about many kid-friendly cards is that companies such as Greenlight, FamZoo, Current and gohenry, put parents in control but give the child enough freedom to learn financial responsibility and money management skills. All without getting into serious trouble, as they could with a credit card.
Beyond that, many are designed to have few or no fees other than the monthly or yearly service fee. They also often boast a no overdraft option. This means that your kids cannot dip into the negative. They can only spend the balance on the card.
Teach kids about money and the exciting ways of compound interest.
We know it sounds over-their-head and possibly premature but there are simple ways to demonstrate compound interest. For example, for every $100 they save, you can add an additional $10 to their kitty.
Are your children already saving up for their first ride? You could offer to “match” their savings with what they have come time to hit the road. Naturally, this is up to you and your preference for your own funds. But this is to give you some ideas of how you can show them what banks also offer in terms of compounding. Free money is always worth pursuing! And what a great way to support your children in their goals while also demonstrating that financial goals are far more than numbers.
We know what you’re thinking. You can barely get your teen to brush their hair—how in the world are they supposed to become investment savvy? The earlier your teen can get started investing, the better. Compound interest is a magical thing! Introduce your teen to it at an early age, and they’ll get a head start on preparing for their future.
No matter your child’s age, there’s always a way to introduce money-managing habits that are sure to stick with them for the long haul. If you have more questions, feel free to reach out to us. At Two Sense Consulting, we offer a free consultation and are in the business of helping parents and professionals alike manage funds in ways that bring money and time back into your life!