As a parent, there so many things you need to teach your child to ensure they’re prepared for adulthood. And one of the most important things they can learn from you is financial responsibility.
You can start introducing financial basics to your child at a very young age. Here are some of the methods you can utilize:
Show them how money works.
One of the most fundamental things you can teach your child about finances is the purpose of having money. It can be hard for them to understand what money is if they don’t see it in action. You can illustrate the purpose of money by taking your child shopping. When it comes time to pay, have them count out the bills and coins and hand the money to the cashier. In this way, they’ll have an opportunity to practice adding. And if they receive change, they’ll learn about subtraction. You can use the receipt to explain these concepts further.
Explain where money comes from.
An allowance can be a useful tool in teaching a child how to earn money. By tying an allowance to chores, you can show your child how people get paid for doing work. By receiving a lump sum of money as an allowance, they can also experience the decision making that goes into whether to save or spend that money. And if they decide to spend it, they’ll face the decision of what to spend it on, learning that money is not infinite. You can also teach your child the importance of making their allowance last until their next lump sum of money is expected. This can be an effective way to teach money management.
Teach them to save.
As children start to accumulate some of their own money, and begin facing the choice of whether to save or spend it, you can work to drill home good savings habits. For young children, you might start them off with their own piggy bank or money jar, and show them how loose change, allowances, or birthday money can accumulate over time. You may even consider helping them open their first savings account. All children under the age of 18 will need a parent to open a savings account with them. As the parent, you’ll remain on the account, and will have control over the account, until your child reaches the age of 18, at which time you can remove your name from the account.
Some banks, like BankFive, even offer special savings accounts for children. At BankFive, our Nickels Savings Account for Kids helps turn saving into a memorable, fun experience for children. This account is geared toward kids 12 and under and helps them learn responsible money management. Child account holders receive a free stuffed “Nickels the Dog” toy at account opening, and Nickels celebrates their birthday by sending them a card every year. The Nickels Savings Account for Kids also provides each child accountholder with their very own passbook, which allows them to see a record of each of their deposits so they can watch their savings grow.
Introduce them to budgeting.
You can expand on the concept of saving by explaining to your child how they can divvy up their money into different “pockets.” One pocket might be for a short-term expense, such as an inexpensive toy. Another pocket could be for a larger toy, such as a bicycle, which requires a longer-term investment. A third pocket might be set up for general savings. And you may also want to introduce a fourth pocket – one that’s intended to teach them how to share with those less fortunate. Teaching them about philanthropy can help instill in them a sense of community and caring for one another.
This “pocket” approach is a great way to introduce kids to budgeting. By knowing how much money they have, they can make conscious, smart choices about what to do with that money.
Help them open a checking account.
When you feel your child is old enough to be more financially savvy, you can help them establish their own checking account. With a checking account, they’ll learn the importance of balancing their deposits and withdrawals. They’ll have a chance to withdraw money and make purchases with a debit card, write checks, and track their account activity with monthly statements or Online Banking tools. You can even show them how to use mobile banking apps to make mobile deposits or exchange money with family and friends (a skill that is likely to come in handy once they’re in college). Many banks offer checking accounts specifically tailored to students and teenagers.
Practice what you preach.
And don’t forget that the best way to teach financial responsibility is to lead by example. By making an effort to be responsible with your own finances, you can help hammer home good money management habits with your child. Another thing you can do is show them why it’s so important to handle money responsibly. Go through your credit report with them. Explain how missed and late payments are documented and can make it harder for you to purchase a car or house down the road.
Teaching your child how to be smart with money will pave the way for a financially stable adulthood. It’s one of the most important things you can do for you child.
You can start introducing financial basics to your child at a very young age. Here are some of the methods you can utilize:
Show them how money works.
One of the most fundamental things you can teach your child about finances is the purpose of having money. It can be hard for them to understand what money is if they don’t see it in action. You can illustrate the purpose of money by taking your child shopping. When it comes time to pay, have them count out the bills and coins and hand the money to the cashier. In this way, they’ll have an opportunity to practice adding. And if they receive change, they’ll learn about subtraction. You can use the receipt to explain these concepts further.
Explain where money comes from.
An allowance can be a useful tool in teaching a child how to earn money. By tying an allowance to chores, you can show your child how people get paid for doing work. By receiving a lump sum of money as an allowance, they can also experience the decision making that goes into whether to save or spend that money. And if they decide to spend it, they’ll face the decision of what to spend it on, learning that money is not infinite. You can also teach your child the importance of making their allowance last until their next lump sum of money is expected. This can be an effective way to teach money management.
Teach them to save.
As children start to accumulate some of their own money, and begin facing the choice of whether to save or spend it, you can work to drill home good savings habits. For young children, you might start them off with their own piggy bank or money jar, and show them how loose change, allowances, or birthday money can accumulate over time. You may even consider helping them open their first savings account. All children under the age of 18 will need a parent to open a savings account with them. As the parent, you’ll remain on the account, and will have control over the account, until your child reaches the age of 18, at which time you can remove your name from the account.
Some banks, like BankFive, even offer special savings accounts for children. At BankFive, our Nickels Savings Account for Kids helps turn saving into a memorable, fun experience for children. This account is geared toward kids 12 and under and helps them learn responsible money management. Child account holders receive a free stuffed “Nickels the Dog” toy at account opening, and Nickels celebrates their birthday by sending them a card every year. The Nickels Savings Account for Kids also provides each child accountholder with their very own passbook, which allows them to see a record of each of their deposits so they can watch their savings grow.
Introduce them to budgeting.
You can expand on the concept of saving by explaining to your child how they can divvy up their money into different “pockets.” One pocket might be for a short-term expense, such as an inexpensive toy. Another pocket could be for a larger toy, such as a bicycle, which requires a longer-term investment. A third pocket might be set up for general savings. And you may also want to introduce a fourth pocket – one that’s intended to teach them how to share with those less fortunate. Teaching them about philanthropy can help instill in them a sense of community and caring for one another.
This “pocket” approach is a great way to introduce kids to budgeting. By knowing how much money they have, they can make conscious, smart choices about what to do with that money.
Help them open a checking account.
When you feel your child is old enough to be more financially savvy, you can help them establish their own checking account. With a checking account, they’ll learn the importance of balancing their deposits and withdrawals. They’ll have a chance to withdraw money and make purchases with a debit card, write checks, and track their account activity with monthly statements or Online Banking tools. You can even show them how to use mobile banking apps to make mobile deposits or exchange money with family and friends (a skill that is likely to come in handy once they’re in college). Many banks offer checking accounts specifically tailored to students and teenagers.
Practice what you preach.
And don’t forget that the best way to teach financial responsibility is to lead by example. By making an effort to be responsible with your own finances, you can help hammer home good money management habits with your child. Another thing you can do is show them why it’s so important to handle money responsibly. Go through your credit report with them. Explain how missed and late payments are documented and can make it harder for you to purchase a car or house down the road.
Teaching your child how to be smart with money will pave the way for a financially stable adulthood. It’s one of the most important things you can do for you child.