There’s a common belief that kids are like sponges, able to soak up knowledge more quickly than they will be at any other time of life. They learn math, reading, writing, scientific concepts, history, geography, and the arts in school. However, as important as it is, money management is a topic not formally taught in schools.
This means it is up to us – parents, grandparents, or other trusted adults – to guide children toward financial readiness. After all, economic ups and downs are a part of life for everyone, and it is essential to help today’s youth grow up knowing how to set and reach financial goals, manage credit and save for their dreams.
Laying the foundation early for kid savings is critical – in fact, as soon as they understand the basic concepts of counting and money financial readiness should be included. As they mature, the concepts they learn about money management can become more complex, from simple kid savings and spending to managing a checking account or loan, paying bills, and even investing and other financial planning.
Here are some tips and guidelines to help kids learn financial readiness and create a financial roadmap for their futures:
Teach them the value of earning.
Whether kids are required to earn their allowances through chores or can earn extra money when they complete different tasks, allowing them to earn helps children attach value to work. It also helps them learn that money is a limited resource that must be used carefully – a concept helpful to learning budgeting skills. It is also a great way to help them understand the value of money management and longer-term financial planning.
Help them build a budget.
Once they start earning money, sit down with your kids and help them map out how much they earn and how they plan to use it. This is the foundation for a simple budget that can keep them on track toward reaching their goals. From here, they can engage in financial planning to establish money management goals, such as purchasing a special toy or electronic device, and figure out how to reach that goal and how long it will take.
Encourage extra earnings.
If possible, provide your children with additional earning opportunities: special jobs, projects, and even challenges to better themselves, such as a book reading challenge to make money. They can also take on odd neighborhood jobs like dog walking, mowing yards, or babysitting. Older kids can take on part-time jobs as well. As they become used to putting in hard work for money, they’ll be more likely to spend it wisely and save.
Set expectations for purchases.
Since they are now earning their own money, have your kids spend their money on things they want. Sometimes a blurred line between wants and needs – such as that between basic school clothes and an extensive wardrobe of designer fashion – be sure to establish where you draw that line, what needs you will provide them, and what wants they are to pay for themselves.
Discuss financial challenges.
Kids need to understand their everyday and extraordinary financial challenges – such as missed payments or overdrawn accounts during economic recessions – and how to face them. By helping them see that these challenges are a normal part of life and that there are strategies to help navigate through them, your kids can learn to be more confident in managing money.
Having a multi-pronged approach that grows in complexity with your kids age can help them become financially ready when the time comes for them to manage money on their own. For help with kid savings accounts or other financial planning solutions for the kids in your life, stop by Magnolia or call us at (800) 997-7919.