Riding a bike, going to school, getting a first job – there are plenty of rites of passage for growing kids. Are you including financial literacy – teaching them about money – in that group?
Studies show that teaching kids financial literacy can help set them up for future success. And one study found that kids already have money habits set by age 7. Keep some of these tips in mind to help kids of all ages learn to save and spend with confidence.
Demonstrate How Saving Works – And Why It’s Important
Even young kids understand concepts like counting and having more or less of something. Parents Magazine suggests building on this concept by providing them with a pile of change, explaining what each coin is called, and having them sort the coins into groups.
As your child matures, you can introduce concepts like saving and planning for items you really need. The next time they ask to buy something, explain that it costs money and you need to decide how to spend that money. If they want multiple things, have them choose just one that they really want.
Older kids can begin to earn an allowance for helping around the house or doing well in school. You can explain that, similarly, adults have jobs and go to work to earn money.
Make sure the allowance is big enough to actually buy something before long, but also age-appropriate. Kids may also begin to get money as a gift for birthdays and holidays around this age – making it the perfect time to help them open a bank account.
How to Budget for Needs and Wants
With a little cash on their hands, kids are set to learn about budgeting and spending vs. saving. It’s also a good time to reinforce the concepts of needs vs. wants.
Have your child identify an item or experience – like going to the zoo – that they really want. Help them see how much it costs and how much they will need to save up to earn it. If they decide they would rather save their money for something else, help them understand how savings will add up over time.
Needs vs. wants is a simple concept, but many people – kids and adults alike – struggle with budgeting for both. It could help to make a list or chart and identify items that would fall into either category.
Related read: More easy ways to teach your kids about money >>
Saving Money Tips for Older Kids and Teens
For older kids, savings goals might be bigger – a new computer, car, or even college. They may also have more to save and spend through a new job. This can bring a sense of freedom, but also requires responsibility.
Some of the concepts that are important for teens to understand include:
- Debt – and especially why credit cards are best used wisely.
- Loans – how they work, and if using one for college is a smart idea.
- The stock market – they don’t need to be an expert stock picker, but it is helpful to understand the market at a basic level.
- Credit scores and reports – and how both good and bad decisions can have an impact on them.
- Saving for retirement – again, they may not need to do this immediately, but when they start their first “real” job it will be a key concept.
The teenage years are a great time to open a checking account so your student can begin learning how to keep tabs on their account, write checks or send money via an app, and have a source to pay for all the things they need.
A debit card is also a safer way to give them some financial freedom – because they can’t spend more than they have in their account.
Teaching Children the Importance of Generosity and Giving
One of the joys of being financially independent is getting to decide where to give back and how to make a difference with your resources. And there’s no better time than childhood to demonstrate this value.
Here are a few ways you can show your child about giving back and encourage them to get involved.
- Identify a local charity you can support through a tangible gift – such as donating cans of food to a pantry. Let your child help you pick out items to give and then drop them off together.
- Have kids add money to the collection plate or basket at church – and if they’re interested, let them know they can add their own money, too.
- Involve your child and other family members in choosing a charity they would like to help support. Some service organizations allow you to sponsor a child in another area or country, which can be an educational and rewarding process for your child to be involved in.
- When your child receives money as a gift, ask if they’d like to share any of it with one of the charities you’ve identified.
Remember that giving does not always need to involve money. Model other ways of giving for your child, too, such as volunteering or doing something nice for someone else.
Start Your Child Off With a Checking or Savings Account
Whether you want to start an account for your new grandchild or your teen needs a place to deposit their birthday money, Mercer Savings Bank can help. Learn more about opening a youth and student account and get started today.