5 Financial Topics to Teach Your Kids
Teaching our kids about finances can be a challenge for many of us. Often because we don’t feel confident in our knowledge to share.
These are topics that every kid should know…
1. Where money really comes from. Even if our kids understand that we go to work and get paid, they may not understand how that really works. And they often don’t know that money doesn’t grow on trees or that is not an unlimited supply.
Ideas: Offer your child an allowance.
Start a chore chart where tasks have an amount attached. For example, making the bed may pay 50 cents. Unloading the dishwasher may pay $1. This can be done with poster board or a wipe off board or anything that works for you.
Consider hanging it an area where it can be easily seen and reviewed.
Have a way to track the chores, like stickers or a check mark so it’s easy to see what chores have completed.
Create a time limit for the money earned. For example, a week or a month. This depends on how often you want to award an allowance.
Always consider your child, their age, their abilities, etc when setting chores and goals. There is no one right way to do this. Do what works for you and your family.
Older kids could have more challenging chores or have other ways to make money like doing odd jobs for neighbors or family. SAFELY of course!
These are great ways to teach your child the result of work.
2. The importance of savings and how to set goals. This can also help them learn to be patient before making a purchase. You can also get into how interest on savings accounts work.
Putting their money in a savings accounts has advantages. That money will earn interest! No matter how big or small an interest rate is, it helps money grow. And lets be honest, it won’t earn that interest at home.
Having an account is also a great way to not impulsively spend. If the money is not in their hand it takes more thought to spend it.
Goal setting: Setting goals makes saving easier. Saving for something special you want, and taking the time to earn and save to buy it is a great accomplishment and a source of pride. The child will see tangible evidence of hard work.
It also helps them learn that sometimes you need to say no to something now, while you save for something bigger, so you can say yes later!
All of these things are great lessons in money management and developing smart spending habits!
3. Wages & salaries… and paying taxes. It’s fairly easy to explain the wages or salaries especially if you use something like the chore chart we discussed. Explaining that the harder the job or the more skill you have, the more you can make.
The more challenging thing to explain is taxes and many younger kids simply don’t understand it.
But for older kids, you can explain the basics and explain what the taxes are used for and why we pay them. For kids closer to adult age, perhaps even show them how you file and what is involved to give them an idea of how it works.
Idea: For older kids, when you pay them for their chores, actually keep a percentage for “taxes”. Put that money aside and then use it buy something for the family. Or something that represents a greater community. This can show them how taxes are meant to be used.
4. How bank accounts work.
Go over the basics of savings and checking accounts. Savings accounts are like they sound and again, you can talk about interest earned.
Checking accounts are more for your daily money. Explain that a debit card drafts from that checking account so if there’s no money they shouldn’t spend!
Especially with older kids, you can even explain that there are fees if you over spend.
Teach them to track their money in those accounts with an app, spreadsheet or old school pen and paper. Whatever works for them.
And don’t forget ATMs. Again, the money needs to be there for them to withdraw.
Tell them how the money gets to their account. Depositing at the credit union or even direct deposit for most of us.
Go over checks! Many of the kids today don’t know what a check is! But that is another way for money to come out of an account OR it may be what you are depositing. At least show them what the parts of a check a mean and if you can show them how to actually write one.
This info can also help them know if a check is legitimate when they receive one.
There are even more account types, but again, many of those can wait unless you child is closer to adult age.
You can touch on loans here if they are ready as well.
5. Different ways of paying for things.
This is one of those times that the “show versus tell” can make the lesson really stick. For example. Let them see pricing on an item at a store. Then have them actually hand the cashier money and receive the change. This helps them see the direct effect of spending.
As they are old enough to understand, you can also talk about the added costs of many items like taxes, fees and even tips.
This is also where you can bring up debit cards and where they money comes from. And cover credit cards and how they are different. Fees can be part of that too. Credit always costs you more.
An example can be explaining that ordering a $10 meal from door dash will cost you 3 times that with all those added costs. You can start basic with just the basic cost and later you can go that extra step and start explaining the other costs.
Bonus tip: Explain opportunity costs. Which is essentially the value of what you lose when you choose a different option.
For example, weighing a job choice where one may make more but it costs you more in commuting, etc. But another pays less but actually has great benefits so you end up keeping more in your pocket. This can help teach not just the cost of things but the value.
Adults face these choices often and sometimes we forget that kids do as well. An example that fits their maturity level could really be helpful. It could be something as simple as deciding to stay home and study versus going out to a concert with friends. They learn to weigh the value and the costs.
If opportunity cost is not the best phrase to use with your child, you can use different language. It’s the lesson that’s important.
Teaching that financial choices can have consequences, just like other choices in life.
Bonus 2: Help them find what they are good at and how to get an education to pursue it. Help them know there’s not just one way to get training and that they can try on different interests to find what suits them. Interests may be best as a hobby or they may become a career!
Helping them navigate those decisions can be helpful in them having a happy future.
Also, when it comes time for them to apply for jobs and create a resume, help them find sample resumes and gather the info they need to put in applications. That may be to a job or even to college. That can be an overwhelming experience, especially the first time.
Remember! These are ideas to get you started. Choose one goal you would like to teach, start with the basics and then build from there. Do what works for your family.
Be willing to find help when you need it. Be willing to ask questions and find answers. We are certainly here to help where we can!
There is often no one right or wrong answer to many of these life questions… we are all doing the best we can! Be patient with them and yourself. And You will get there!