Educating Your Children on Finances.
Educating Your Children on Finances
Schools are back in session, but financial education starts at home. There are multiple financial life lessons you can begin teaching your children. From a young child all the way to adulthood, financial education leads to financial success.
Ages 3-6. Their eyes are on everything.
At this young age, children are like little sponges, learning and soaking in everything. This means they catch more than you think! This is a great time to introduce key financial concepts that they can carry throughout their lives. One study from the University of Cambridge found that money habits in children were formed by the age of 7.
When they get money for a birthday or holiday, have them save it in a clear piggy bank or jar. At this age, humans are visual creatures. As they see the amount of money grow they will get excited. Each time you add money, use this as an opportunity to count what they have saved. Help them set a goal of something they would like to use the money on.
Activities teaching how to save and the importance of patience are important in this early development in showing sometimes you have to wait. Remember that young children have a short attention span so it is important to keep their goals fairly short.
Ages 7-13. Their eyes are on you.
At this transitional age, children are watching everything you do, they are closely tuned into their parents spending habits. This age group is building their habits and values from what they see their parents do. What your kids see you do is a lot more powerful than what they hear you say. Of course when they see and hear the same thing that creates a strong message.
Teaching this age group the difference between wants and needs can help build day to day habits that will shape how they earn, save and shop. Weighing decisions and teaching consequences, such as ‘if you buy this you will not have enough money for that’, helps teach budgeting and saving skills that prepare them for a successful financial future.
Explaining budgeting at this age doesn’t have to be difficult, there are tools such as Three Jars that can help them understand spending limits, and learn money management in an easy and fun way. Using a free digital program will speak to this age group right where they are… on their phones! Three Jars has an app that works like a ledger so your child can keep up with their spending and saving.
Explain to them how to read what is on a receipt. How sales tax is calculated and how to determine percentages such as tips or discounts. Understanding sales tax is important when saving for larger items.
Ages 14-18. Their eyes are on the future.
As our children are reaching young adulthood, we are preparing them to go out into the world. We want to make sure they are equipped with those life skills that will yield success. Buy this time they may already have developed a concept of how the financial world works. However, they are now ready to learn some more in-depth concepts that will come into play as an adult.
Checking accounts are a necessity, and using a debit card is the preferred method of payment for most, but we must teach our kids that money comes from somewhere! Once your child begins earning money, setting up an account for them is a great way put a real budget plan to use. They will be a lot more cautious of what they spend their money on if they are the ones that have to work to earn it.
According to a 2017 poll, nearly half of Americans are living at or beyond their means each month. Sharing the family budget and helping them to create their own is an extremely useful life skill. If your family does not have a budget, make one together. It will give your children a greater appreciation of what they have and how it is earned. For tips on creating a budget, you can visit our blog on financial success.
A Partner Savings account is a great option, for young and older children, to explain how interest accrues. Letting teens practice money skills and making their own financial choices keeps them from feeling overwhelmed with the responsibility once on their own.
When you go to purchase their first car, sit down and explain how getting a car loan works, and how lending works in general. This is a fantastic transition into a conversation about how credit works. Explaining the potential dangers of credit card debt and how to build a positive credit history can put your child ahead of the game as they ready for college.
College is already a conversation most parents are having with their teens in high school. Payment options and how student loans work is a vital part of this decision-making process. As of 2018, the average debt per student borrower is $27,975. For more information on financing higher education, we offer free financial education online.
Do you feel like you could benefit from some financial education yourself? The best way to teach your children about financial health is to lead by example. We at Legends Bank strive to arm our customers with the knowledge to succeed, which is why we offer financial education courses through our website.
Sources: University of Cambridge, CNN Money, Student Loans.net, Dave Ramsey