Your Money Matters!
Money Matters for Kids
At what age does a parent begin teaching their child the important concepts of money? When it comes to educating your child with money management skills, start early and have a plan. If you don't or if you expect your child will learn this in school, think back to your own education and who taught you how to handle money.
Financial matters are personal and parents can take the leadership role by communicating their individual values concerning money. Start with discussing the family budget with your children, setting reasonable allowance for each child in the family, and teaching your children to manage their money. Focus on coaching your children to think about how much should go into savings, how much goes to living expense and how much goes to charity. Making charitable contributions is a rewarding experience and can teach kids how important it is to help others.
There is no easy way to pass on your knowledge but by doing so; it will help your children be successful, contributing adults. Here are some suggestions to teach financial responsibility:
What lesson you convey depends on your child's maturity
Begin with money facts and the concept of trading. Teach children to identify the different coins and bills, where money comes from, and how to make choices with what they have to spend. A piggy bank is an excellent tool to teach saving at a young age. Another learning tool would be to set up a play toy store at home, or have your child help decide between two items at the grocery store. This makes me think of my childhood lemonade stand. Through my parents' encouragement, I learned the concept of earning a profit and how to compare the cost of the items it took to make lemonade and what a cup could be sold for. I remember the lively discussion I had with my brother of how much money we could make and what we could do to increase the profit. It seemed like a game at that young age but the fundamentals stayed with me.
I recommend a parent open a savings account for their child shortly after birth. All too soon it will be time to begin discussing savings principles. Explain and demonstrate the concept of earning interest income on their savings accounts. A great method to help teach your child how to save is to match the amount of what your child saves on their own.
Kids ages 6 to 8
Activities should focus on money skills such as setting up a monthly saving goal, managing an allowance, and depositing money in a savings account. They can learn how to make change, look for bargains, and estimate the total of several purchases. Begin setting goals. People young and old rarely hit targets they don't have. Nearly every toy a child asks for can become a lesson in goal setting. By helping your child reach their goals teaches them life-long skills of planning and budgeting. Allow them to withdraw the money they have saved for their important purchase.
Kids ages 9 to 12
In this age group children can work on smart money habits such as comparison shopping and understanding how a checking account works. Have them set up a weekly spending plan and money diary to help determine their allowance and to continue reinforcing goal setting. If you are out to dinner and use a credit card to pay the bill, use this as a learning opportunity. Explain how to verify the charges and how to calculate a tip (a tip should never be calculated on the sales tax portion of the tab). Also discuss the importance of reviewing your statements to make sure all charges are accurate and to keep your credit card safe from fraudulent activity as well as keeping important documents safe from identity theft.
Teenagers
At this age, they can get involved in such things as doing research for a major family purchase and creating a budget for things like clothing purchases. It's also a good time to get them involved in learning investment skills and lifelong skills such as opening an account with a utility company, evaluating a rental agreement, and the difference between buying and leasing a car. Caution your child about borrowing money and paying interest. Pass on the knowledge that credit is all about renting someone else's money for a specified period of time.
When your child is 16 and especially beginning to drive, have them open a checking account and apply for a debit card. Teach them how to keep track of their expenditures and to keep track of their account balance. They should verify all their deposits and withdrawals for accuracy and how to balance their account. Have them access their account through online banking and understand the convenience of using ATMs. College kids also need to understand about borrowing and credit histories. By teaching your high school student about banking and credit now will make them much savvier when they are making decisions on their own at college.
Money gives all of us decision-making opportunities. Being equipped by starting at a young age with a fundamental understanding of money management, helps us to be better prepared and successful throughout life.
Courtesy of Anne Blain, CEO of Chiropractic Federal Credit Union
If you have a financial question, please forward to:
ablain@chirofcu.org
Subject: “Your Money Matters”
