Money Management for Kids
April is Youth Month! Credit Unions all over the country will be celebrating youth all month long! So, of course, what a perfect time to talk to your kids about finances.
How many of you remember taking Home Economics in school where you learned things like how to cook and sew. I also remember being taught basic banking including how to write a check and balance my checkbook. For years those lessons haven’t been taught in school. In fact, these lessons are now the responsibility of the parent or caregiver.
The challenge with that is, well, it’s proving to be a challenge. Parents are busy and often just don’t think about it. They think I’ll do that when they are older, then suddenly they have adults. Or they don’t know the information themselves or how to approach it.
One great thing is that people are recognizing this and the importance of creating opportunities for kids to learn. In fact, First Pioneers offers financial basics seminars for teens at least once a year as well as ones for young adults. The number of organizations offering these types of classes or seminars is growing. We recommend you check out your local community or even online for opportunities that might be helpful for you and your family.
Here’s a question, parents. Do you know the best first step in teaching your children? You are. Being a good example. The best way to teach a child is by showing and you might discover that you have a few things to work on too, while you’re on this journey. Showing your kids growth and your willingness to learn and change is always a great example. None of us are perfect and it’s ok for them to see that. Not only will they learn that it’s ok to admit when you need help, it will show them that change can happen and your situation can get better when you work at it.
Starting this conversation, can also start to normalize money conversations and help your children be more comfortable asking money questions. How many of you feel like money is a taboo subject? You just don’t talk about it. It’s no one’s business right! The parents just handle it and no one talks about it. But when it’s your immediate family and you are all effected, a healthy conversation about finances can be really important.
One of the challenging things about talking with your kids about money is making sure you are being age appropriate. Your conversations will grow and change as your child grows and their needs change. For example, with younger kids you can start with something as easy as counting money. Not only is it a great math exercise, it teaches them the values of the different denominations and how to recognize them. Then as they get older you can get into more advanced things all the way up to how to handle a checking account when they get a job.
When we talk about basic money management to discuss with your kids, first we need to talk about how your kids will earn or receive money. There are several ways this can happen like receiving a gift of money for a birthday or an event like a graduation. Many parents give an allowance, but we suggest considering helping your child find ways to earn money. You can do chore-based compensations, which is a really big word for saying, pay them for the little jobs they do. Even little kids can get involved in that. You can give them a quarter for making their bed or 50 cents for feeding the dog. The key here is chores should be age appropriate and the compensation should match the job. The bigger the job the bigger payment. You know your child and your situation and what will work for your home so do what’s appropriate for you. These payments can add up to what you were going to give as an allowance but now instead of just giving them money, it gives them a sense of pride for earning their money! You are showing them that money can be earned, that doing a good job is often rewarded, and then they can use what they’ve earned for things they want.
As they get older, help them find other means for making money. They could take babysitting jobs or do yard work for a neighbor. Of course, again make sure the job is appropriate and that the person offering to hire them is someone you trust. Always consider safety first! There are many creative ways for young people to make money besides a traditional job and you might be surprised how many people are willing to hire for them for little jobs. They are aware that it not only helps them get things done, but they get to be part of the lessons as well and for many that can be a very joyful and fulfilling thing. Because it takes a village, right?
Now that your kids have money, what now?
This is a great time to include a talk about contentment and impulse buying. Ask them, or have them ask themselves if they REALLY NEED the brand new iphone? The one they have is working great, so it’s not necessary to upgrade to the newest thing just because you can. The truth is contentment starts with you, inside you. You may not have the newest iphone or car but if those things are doing their job, then reminding them, or maybe ourselves, that it’s not about what someone else has, it’s about what works for you and being happy with that, being content.
Plus, the money you would spend on the latest greatest things is money you can spend on something else, maybe even something that is a higher priority. Be content with what you have. It’s really the same with an impulse buy. Stores will put little things near the check-out to entice you to purchase. It’s literally part of how they plan their store layout to increase sales. This doesn’t mean you need that thing. Remind your kids that spending $3… $5… $10… every time you go to a store will add up quickly and instant gratification is not necessary to be happy. Ask them to answer if they will still want it. Or if they will still need it tomorrow. Ask how long they will really use it or play with it? If those answers are no or not long, then have them really consider if it’s worth it and to wait. If they still want it that badly the next trip to the store a week later, then maybe you consider it. Also consider letting them buy it with their own money. This way they start understand that things really cost and once they spend that money, its gone until they earn more to replace it.
Speaking of keeping track of all this money, let’s talk about the second topic, which is budgeting and tracking. Budgeting may be a little more challenging for little ones, but as kids get bigger and become responsible for paying for things it’s a good time to begin that lesson. For example, maybe they want to subscribe to a streaming service. How many of us have several services already? Consider letting them pay for it themselves.
Or maybe they could pay their cell phone bill or something small that can serve as a great way to start teaching the budgeting process. Help them look at how much money they have, if they will earn any in the future, and then how much the bill will be each month. For example, if they receive a $10 allowance a month and the service they want is $6 a month, they could take $6 out of one weeks allowance or maybe $3 out of 2 different weeks allowance to pay the bill. Help them get creative if they need to! Sometimes budgeting can use some creativity!
Last but certainly not least, let’s talk savings. We talk about saving a lot because it’s one of the most important things you can do for your finances. That’s no different for kids. You can start by teaching them to create goals for things they want to purchase. It may be a toy or game or game system at first, but eventually that will probably become bigger things like concert tickets, school or cars or that phone we talked about earlier! This can actually go hand in hand with your conversations about contentment and impulse by the way. Suggest they save up for those things they want!!
There are a several easy ways you can teaching savings. For instance, for littler kids you may consider a clear jar they put their money in. This way they will literally watch it get bigger or smaller when they spend part of their money. Things can often be much easier to understand when it’s visual so this is a great tool to try.
As your kids get older, you can start teaching the responsibility of having a savings account. Open an account for them where you can show them how to make deposits and withdrawals. Then eventually you add a checking account and so on as they become adults and their needs grow.
The key is to talk to them and let them talk to you. Let them ask questions and when you don’t have the answers, work on finding them. Wherever you bank is a great place to start and there are organizations that offer programs. There are answers and there are people who genuinely want to help. Again, showing them and being an example of how to move through their finances is invaluable to their financial future. Show them you are there to help.
Now for a couple of bonus tips…
Teach your kids to give! Demonstrate the importance of giving. Let them pick a charity or a church but let them pick where they want to give. Giving helps someone. It can literally transform someone. It can help a family get back on their feet. It can help a child have Christmas presents where they wouldn’t have before. In fact, an angel tree or something similar is a great place to start giving. But what many don’t realize is that while giving helps someone else, but it will also help the person that’s giving. That feeling and that sense of love for someone else can change your life as well.
Bonus number 2 - teach your teens the danger of credit cards. As they get older the offers will start coming in. Make sure they understand that credit cards are not a quick fix when you want something but don’t have the money. If you don’t have the money for something then wait until you do. Credit card balances will grow faster than you think and then it can be a huge challenge to get out from under that debt. Minimum payments don’t make a dent in the balance and it continues to grow because of interest owed. Help them know the dangers and encourage them to stay away from that kind of spending.
The takeaway from today, YOUR homework is actually pretty simple… Talk to your kids. Share what you know about finances. Get creative on how you can help them. AND don’t be afraid of it or afraid to look for places where you can get guidance if you need it.