Teaching Money Lessons to Kids
Being able to buy virtually anything online with a smartphone means that teaching kids about finance is that much more important than it was when you were a kid.
The impulse to buy can be tempered by activities and real-life contexts. Even everyday activities like buying groceries can become recurring money lessons. In time, teaching financial literacy through activities will help your kids learn to save and spend wisely.
Try starting with a few of these:
Three piggy banks
Instead of giving children one place to save money, give them three. Designate a piggy bank for saving, one for spending and one for charity, and explain how each should be used.
The spending one should be for cheap activities, candy or toys they want right now. The savings piggy bank should be their option for more-expensive items that they need to save up for over time. The charity one is for donations to organizations they are interested in.
Money from chores or special events like birthdays or holidays can go to each of them. You could also require them to reach a certain amount for each piggy bank. This will help them see how money can be broken up into different uses and how budgeting requires that you make hard choices. At the same time, it will give them some freedom to choose where their money goes.
Spending limits at the supermarket
As you pay for the weekly groceries, bring your kids and have them carry some of their spending money with them. When they want candy or other eye-catching snacks, ask them if they have enough for it. If they don’t, remind them that they can bring more money, perhaps from their savings, with them next time.
Casually making them aware of spending limits will help them learn the concept of budgeting. If they can’t afford a snack this time, encourage them to wait until they have enough. Remind them of spending limits also when they ask for stuff online or at toy stores. Delaying that spending impulse will help them learn the difference between a want and a need.
Opening a savings account
When your kids start saving on their own, consider having them open a savings account. At financial institutions like Blackhawk Community Credit Union, there are youth accounts that pay dividends and don’t charge monthly fees.
Using an ATM
When you receive your paycheck, which might be directly deposited in your savings account, make an effort to go to an ATM and have your kids go with you. Explain how you transfer money from a savings to a checking account in order to have spending money. Then withdraw part of your money for cash purchases. Since money is becoming more digital with online banking and mobile apps, showing both the physical and online processes can help show their similarities.
When the situation is flipped and your children receive money, remind them about saving it in their savings accounts. Have them go to a branch office or an ATM to experience the transaction.
Through real-life situations, your kids can learn the value of saving their money. Instead of buying items on impulse, teaching them how to budget and use a savings account can put them on the path of financial stability for years to come.
Spencer Tierney, NerdWallet