By Matt Clark, President Federated Bank
As our kids settle back into school life, it’s important to remember that teaching our youth about financial literacy can be as important as all that other good stuff they are taught in school. Teaching children about money (how to manage it, save it, and spend it wisely) is an important tool to give to your child and a great way to teach them about good decision-making. Here are five ideas you can use to teach your kids financial responsibility.
- Kids watch everything their parents do, and that includes how they manage their finances, so set a good example. When parents set a good example, children will see how to apply money management basics and will establish positive habits that will benefit them throughout their lifetimes.
- Open a savings account, at any age. Children who put away part of their allowance each week to save for a new toy, or a teen who follows a longer-term savings plan for a car or college fund are building great saving habits that they can use throughout life. Parents, this is a great way to discuss short-term versus long-term savings goals. Explain to your kids how interest earned on a savings account can help generate more savings over the long-term. Many families use a “spend, save, give” system so kids learn to spend wisely, save a lot, and give generously. Have your kids save and give a certain percentage and then have the remainder to spend.
- Talk to your kids about how to keep track of expenses and about the family’s budget. Give your kids real world examples about managing money and keeping expenses within budget. For example, you could say, “You have $5 to spend at the restaurant today so whatever you pick for lunch has to cost less than $5.”
- Shopping is a great opportunity to talk to your children about the relative prices of products and their value. Why does this kind of bread cost $0.50 more than this one? What do you get for that extra $0.50? Is it worth it?
- For both children and adults, financial matters can be complex. Kids who learn basic principles about earning money, saving money, what things cost, and how to budget expenses will be in a much better position as young adults to understand about mortgages, credit cards, and interest rates. Parents who introduce their kids to solid financial principles early on are providing an important part of their children’s preparation for adulthood.
For more information and resources visit https://www.mymoney.gov/Pages/for-youth.aspx.
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