Whether they receive tooth fairy money or earn a paycheck at their first job, all are teachable moments that can have a tremendous impact on their future financial lives.
Nowadays, it’s almost too easy to spend money. Everything you could want is only a swipe of your credit card or few clicks away. While convenient, this also propels instant gratification and can lead to overspending and poor money management skills. Teaching children about money at an early age will allow them to build proper savings habits, better manage their money in adulthood, and hopefully avoid the temptations that come with the ease of spending.
Begin Healthy Money Habits Young
Even at a young age, children begin to notice money. They may see you paying for items at a store or restaurant. Use these moments to teach your child how money works.
To help them better understand money:
- Begin by setting small savings goals.
- Find a toy or other item they want.
- Explain they will need to earn money by completing chores to receive the item.
- Help them track their progress with a chart or through other tools, such as a piggy bank.
These simple lessons will provide the foundation for building future savings habits.
Saving in Elementary School
While in elementary school, children begin learning the basics of math and better understand the concept of money’s worth. Enhance their savings skills by using a jar or envelope system.
Create three separate envelopes or jars. Label them as:
- Savings: Money to save towards a future goal.
- Spending: Money they can spend now however they wish.
- Charity: Money that will be donated to a charity or those in need.
Whenever your child receives money, have them put a portion into each jar or envelope. This strategy allows them to have money to spend right away in addition to saving and giving back. It’s a great visual tool that will help them better understand where their money goes.
Teen Money Management
Whether your teenager earns money from chores, babysitting, or their first job, money management skills become essential at this age. Begin by opening an account for them at the credit union. Depending on their age, you may want to open a checking account as well (note: you may be required to co-sign on the account).
Once their account is opened, spend time showing them how to review their account balances online and through mobile banking. Explain how not all transactions post to their account immediately, so it’s important to track their expenses.
Each month, review their account statements with them. Compare how much they deposited versus how much they spent. If they are spending frivolously or not saving enough, take time to create a budget for them to follow.
Celebrate Savings Goals
Saving money is a habit that will continue throughout your child’s entire life. The sooner they begin building these skills, the better. Regardless of their age, be sure to celebrate with them when they achieve a savings goal. This positive reinforcement will encourage them to save more and further build their money management skills.
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