As a parent, I am teaching my children the skills they need to be a successful adult. Most people remember to teach them how to cook, clean and take care of themselves. They know to educate them to be a good person. But, many forget about one of the most important things that kids need to know – finances.
This is something I have a very strong belief in. Our kids have to know about money and finances long before they ever leave home. I’ve teamed up with Alliant Credit Union to make sure that you know what you need to teach your own kids – and when to start!
Last year, over a thousand high school students were surveyed to better understand which courses they thought were the most valuable, and the results may surprise you: 51% of respondents answered that it was money management (math finished a distant second at 18%).
I was mildly shocked to see this stat . . . because I can barely remember the personal finance elective I took in high school. Can you? Did your school even offer a financial literacy course?
Luckily for our kids, we can do more to prepare them for the real world by helping them understand money, from their time in the sandbox up through high school and beyond. With summer break on its way, now’s the perfect time to start helping your kids make cents (get it?!) of money.
- Teaching Kids Financial Responsibility
- Educating Kids About Saving vs. Spending
- Learning the Difference Between Debit & Credit
Of course, like any good class, the lessons change with age:
Money-Smart Learning: You can’t buy everything you want
By this age, you’ve probably realized that even the most successful trip to the grocery with your child can get derailed by the shiny objects (and candy) on display at the check-out.
To help keep your little one from having a meltdown, give them a set dollar amount to spend before you start shopping. Two to five dollars may be a good amount to start with.
The most important part is making the dollar amount translatable to different foods, showing your child what they can buy for different amounts. Walk them through the value of an apple and a bottle of fresh squeezed orange juice vs. a candy bar. Letting them hold their $5 bill (if you can put it in a pocket that zips) is another good way to bring their purchase power to life. At the end of the trip, they should be able to decide how they want to spend their money, while also seeing that they can’t buy everything they want.
Money-Smart Learning: Comparison shop
Kids likely don’t believe that money actually grows on trees – as much as we think they might – but at this age, they don’t quite understand its value. As a result, it’s important to show them how much the same item costs depending on the brand and how you buy.
When you’re out shopping, explain your thinking as you make purchases so they know why you think some products are worth more than others. Equally important, show your child the value (in dollars and cents) of being discerning.
For instance, show your child the value of buying in bulk. Go to a store like Target that has bulk and non-bulk items and show them visually what your money can buy. Also, discuss the difference in price between the store brand and the name brand, and why you prefer one over the other.
As an exercise, give them a portion of your grocery list and a budget and ask them to pick out the items you need, making sure to stay within your set dollar amount. Ideally, choose items they’re familiar with (think: juice, milk, macaroni) so they can have a better idea of what they’re getting with their money.
Money-Smart Learning: Everyone places different value on different things
This is a great age to start talking with your child about your values and why you choose to spend your money the way you do. Show them where you save money and where you splurge, and explain your thinking. If you and your partner have a date night once a week and go to a nice restaurant, but eat in most weeknights, talk to your child about the dollars and cents of those decisions.
Letting your child earn a moderate allowance for chores at this age (and invest in their own kids savings account) is a good way to get them to start thinking about what matters to them and how they want to spend their money.
Money Smart Learning: Debit cards are as real as cash
One of the best things about teen checking accounts is that most of them offer debit cards – with daily spend limits. A debit card may not feel like real money, which is why it’s important to teach your teen how debit cards work and how their spending affects their overall account balance. A daily spend limit should ensure they don’t go on too large of a spending spree. Definitely consider opening a teen checking account so your teen can start tracking their spending on a monthly basis – with your help, of course!
Money Smart Learning: Savings goals are attainable
Whether your teen is eyeing a car when they pass their driver’s test or looking to start putting aside money for college, it’s time to start talking with your teen about saving goals.
Talk them through your yearly budget and how you save for larger items like vacations or holidays. It’s important that they start to understand that in addition to the money you spend in stores around town, that you also allocate money to bigger ticket items.
Show them your supplemental savings account and how you put a portion of your paycheck toward different items each month, letting you think longer term. Then, ask them to think about what they value and how they might save for what matters most to them.