Financial education sets kids on the path to financial wellness. And we believe schools should incorporate budgeting skills for students in their curriculum. Unfortunately, only 21 states require courses in financial education prior to high school graduation – and California is not one of them.
Often, parents bear the responsibility of teaching personal finance and budgeting skills to their kids. We know that teaching anything to your children can be a lesson in patience, but this is knowledge your kids can’t “afford” to lack – pun intended.
Financial literacy for younger kids
According to financial expert Beth Dobliner, children begin to understand basic concepts about money as early as age 3. These tips can help you build financial literacy while keeping it fun:
Coins in a jar
Place spare change in a glass jar or clear piggy bank and invite your children to add coins to it. Watching the jar fill up over time keeps kids focused on saving. If you need a piggy bank, be sure to stop by our branch – we’re happy to provide one
Attempting long conversations about money with kids who aren’t yet out of kindergarten might be too much of a challenge. Instead, find moments to explain little things. For example, if you are at the store and paying with a debit card, explain how that’s different from paying with a credit card or cash. Or let them watch you pay a bill online – maybe not the mortgage, but something like the electric bill that might make their eyes pop when they see how much basic things cost. This reinforces that money and budgeting skills are important.
Phase in an allowance
At age 7, most children can handle routine household chores in exchange for a small allowance. You can even offer them extra for special jobs, showing them how they can earn more money for a little extra hard work. The goal of an allowance at this age is not to encourage kids to spend, but rather, to teach them the value of earning.
Let kids make spending decisions
Inevitably, kids with an allowance will want to buy something with it. This is another teaching opportunity. When your children see something they want (as opposed to something they need), have them use their own money to buy it. Walking up to a cashier and purchasing an item with their own money will give them a sense of accomplishment and a real understanding of how money works. Mistakes are okay, too. Making a purchase they regret later is a valuable lesson about impulse buying – one that even adults sometimes forget.
Set a good example
Remember that kids tend to mimic their parents’ behavior. They observe and learn from your relationship with money. If you tend to fret about bills, argue with your spouse about the family budget, or don’t manage your own spending, those negative lessons could rub off on your kids.
Make it fun
Do you remember visiting the bank when you were little? Did you get to pick a toy out of the chest or pick up a free piggy bank? With 1st United’s Road to Savings map, kids can earn prizes just for saving money and even earn $10 when they finish the game. It makes saving fun and helps to build a positive perception of financial institutions with kids. Pick up your Road to Savings map at any branch.
As your kids get older
You can start covering more advanced financial literacy topics such as budgeting skills, as your students become tweens.
The cost of things
When kids are old enough to handle addition and subtraction, they can figure out the concepts of cash flow and monthly expenses. Show your kids how you pay bills or balance your checkbook. The numbers for mortgage or rent payments and other household bills may seem confusing to them, but they should come away with a basic understanding of taking the money you earn to pay for what you need.
Savings and interest
Age 9 or 10 is a good time to begin teaching the concept of interest. Trade in the piggy bank for a youth savings account and show them how to make deposits. Help them track their money as it grows. If you want to be generous (and give an early lesson on 401(k) plans), consider matching their savings deposits so their accounts will grow faster.
Understanding credit cards and debit cards
By the time your kids are ready for middle school, they will have a basic knowledge of card swiping. Explain the differences between credit cards and debit cards, and show them the cards in your wallet. Explain how credit cards charge interest and that, if you don’t pay your balance off right away, you end up owing more.
As your kids move further into their tweens, they may become more interested in spending than saving. If they want to make a big purchase such as a new bicycle or a video game, show them how to comparison shop. At this age, they should be ready to make decisions (with your guidance) about how to spend their savings.
All of your lessons create a foundation for personal budgeting. As they reach high school, your kids might become responsible for paying for their own entertainment, clothing, gas when they drive the family car, or even auto insurance. When they start earning money from a part-time or summer job, they probably should upgrade their savings account to a checking account with a debit card. This will be the perfect time to introduce them to mobile budgeting and banking tools, like our Money Manager.
More educational resources
There are many educational resources available for your kids to begin learning about money management. Consider adding a module or two to your child’s homework routine or after-school activities. Many of these resources include games, which could be fun to do with a friend. Check them out:
As your child’s financial education progresses, your local credit union can help. We are available to answer questions about money and banking, help your children learn how to use online and mobile tools, and even teach them about building credit and creating budgets. Contact us to learn more.