When it comes to raising our kids, we want only the best for them. As parents, we’ve learned from our mistakes, and we try to impart some wisdom on our kids as they grow … if they’re willing to listen. But one of the most valuable ways we can prepare our children for the future is by teaching them to be financially smart.
In the United States, many adults are not financially literate. According to a study by Walden University, more than half of Americans consider themselves “financially illiterate” and report being unable to manage their finances. Looking at one of the country’s generations of younger adults -- millennials -- only 24% demonstrate the ability to understand basic financial topics. (GFLEC)
Teaching your kids about smart money habits at home can help set them up for success as adults and ensure they aren’t on the wrong side of a financial literacy statistic someday. Consider these five ideas for raising financially smart kids.
Talk About Money
Money can sometimes be seen as a taboo topic. But it doesn’t have to be, especially within your own family. One way to get started is by sharing information about your values and how money relates to those values. Then, let your kids be part of the process, when appropriate.
For example, let’s say you try to live a debt-free lifestyle and you’re buying a car for the family. You could consider bringing your kids along with you to the dealership. Explain how buying a used car, rather than a brand-new one, is the decision you made and how it fits in with your preferred lifestyle. If they are old enough, you could look at the math -- how different down payment amounts and financing term lengths impact the overall cost of the car; then, compare that to the cost of purchasing the car outright.
By sharing your financial values with your kids, it opens space for them to observe your actions that reinforce those goals. If you don’t talk to them about money, they may come up with their own conclusions -- and they may not be accurate.
Allow Them to Have Their Own Money
Giving kids their own money is one of the surest ways to teach them the value of a dollar. For some, especially younger kids, an allowance may be the best option. Parenting and money websites and blogs have no shortage of opinions on how allowance should be distributed: How much? How often? Should there be chores?
Whatever you decide, allow them to keep this money to use as they see fit. Though that doesn’t mean you can’t suggest they use it next time they ask you for cash to go to the movies with friends.
For slightly older kids, a part-time job such as babysitting or mowing the lawn may be appropriate, if your kids can handle that kind of responsibility. Giving them the chance to earn money on their own means they will likely value it more than if it came from Mom or Dad.
Make it Fun
You may not find personal finance the most interesting topic in the world, and that’s okay. But there are ways you can make it fun for your kids so they aren’t intimidated by it when they get older.
Here are a few ideas for making it fun:
Help Them Open a Savings Account
Once your kids are thinking about saving money, the next step is helping them set their savings goals. Whether they’re saving up for the next video game or a pair of roller skates, having a goal is one way to start getting excited about saving.
And another way to get excited is by setting your money aside and watching it grow. Helping your child set up a savings account can not only help them keep their money somewhere safe. It can also make them feel a sense of pride and independence, having their own account.
Setting up a savings account for a minor is fairly simple, though they will need a guardian to be the joint account owner. The best savings accounts for kids have online account access. That way, you can help your child monitor their money from home, as well as learn online banking safety and security.
Try Academy Bank’s Student Savings account. Application often takes 10 minutes or less.
There’s no perfect way to teach kids about money. But anything you do to bring personal finance a little closer to them when they’re young can help set them up for success in the future. And remember: the earlier you start, the better off they’ll be.
Just like making an investment, starting early can pay big dividends. Even though young children should not be expected to understand complicated financial topics, including them in family financial conversations can teach them to be comfortable with the topic of personal finance. This gives them a good starting point for growth that can last their entire lives.
Academy Bank Is Your Family’s Financial Partner
At Academy Bank, we know the importance of financial health for the whole family. We’re committed to being your partner as you navigate your family’s finances, with a variety of savings and checking accounts, and more.