As a kid, how did you learn about money? For some people, the topic never came up. Handling bills, income, expense and unanticipated challenges were largely invisible and handled by the adults with little or no transparency. While some families talked openly about money, chances are you were in the majority who received your lessons from the “School of Hard Knocks.”
Some middle or high school classwork might have included the basics about balancing a checking account, or perhaps math class included a chapter on calculating compound interest. Even with this background, for most of us our “lived money experiences” formed our financial literacy.
According to the experts at GreenPath Financial Wellness, there are some clear ways you can model money behavior for your kids and teach them to manage and make financially healthy choices.
- Parents, adults, those caring for children or others should remember they are “modeling” when it comes to money. If there is financial stress in the family about the family budget, the kids are watching – and listening.
- Talk to your partner or other adult in the household and set some guidelines as to what will be discussed within earshot of the kids. Set some time aside—without the children—to work on your finances. With some effort, adults can find a middle ground when there are wildly different money styles in the household.
- In terms of transparency, most experts agree to keep children informed about any financial challenges in a non-threatening way. Explain to them what you can and can’t afford right now and suggest other ways the family can manage and make financially healthy choices.
- Another useful way to raise financially healthy kids is to give them their own spending power. This is “learn by doing” in action, as an allowance can give kids the chance to learn about handling money, while the stakes are still small. Parents might suggest how much to save, and how much to allocate to purchases, but ultimately it is the kids who manage money through their own successes and failures.
- As kids get older, consider paying interest on their savings, they’ve set aside from their allowance, to teach them the value of compound interest.
- Parents can take the opportunity to impart lessons about credit. If older kids want to make a big purchase, suggest they borrow the money from you. They will learn about how lending works in the real world when you charge an interest rate and draw up an agreement. Ask them to make up payment coupons to keep track of their payments
Around age nine or ten, most kids are ready to open a bank account and use it to save for purchases or upcoming travel.
Visit our website to learn more about the saving and borrowing opportunities we have available for our youth members!
