Financial Planning at Every Stage: Building the Foundation
Practical money management skills learned at an early age can have a lasting impact on the rest of your child’s life. In fact, this is one of the most important areas where you can truly change the course of their life. Educating your children about financial wellness will help them build healthy spending habits for the future.
Here are some great ways to teach your kids about money.
- Play games that involve money.
One of the best ways to teach a lesson is by doing so without your child even realizing that they’re learning. Play games that include a financial element like Monopoly Junior or Life and help them strategize during the game. This will help your child learn the importance of budgeting and planning for the future, all while having fun.
- Make a wish list with your child.
An essential part of financial literacy is creating a set of priorities. We can’t have everything we want all at once, but we can achieve our goals over time if we plan ahead. This is a great lesson that children can learn. Work with your child and have them list five things they want. Once the list is created, strategize with them on how to save for something fun on their list first as a short-term goal. Then, encourage them to save for something more serious as a long-term goal.
- Teach needs vs. wants while you shop.
Take your child shopping and actively explain your decision-making process. When you arrive at the store, tell your child how much money you have to spend and what your priorities are. Show them why you are picking one item over another and the difference between needs vs. wants. Remember, children will learn from your example. Telling them about budgeting is important, but it’s much more impactful if they see you following a budget yourself.
- Encourage fun ways to earn money.
When children earn money, it gives them first-hand experience with finances. They learn the rewards of careful spending and saving and the risks of making impulsive spending decisions. Those risks are a lot smaller than they will be later in life! Encourage your children to help around the house, care for their pets or babysit to earn some allowance. Then, help them set goals for their allowance.
If you’re wondering how much allowance to give, know there aren’t strict guidelines. Some parents choose to give one dollar for each year of a child’s age. Other parents base their kids’ allowance on work they do around the house. Some parents put their kids in charge of paying for some of their own expenses – like clothing, video games, or tickets to movies – and set the allowance based on that. Whatever amount you decide on, keep in mind that it will become a regular expense for you to consider in your family budget. Make it work for you and your child.
- Split money into categories.
Get a piggy bank that splits money into spending, saving and giving. Teach your child about what each category is and how they are allowed to use the money in each section. Every time you give them their allowance, talk them through how they plan to use their funds. Place the piggy bank next to your child’s wish list so that their spending and savings goals are clear to them. Also, talk through the charitable causes your child thinks are important, and when they hit a giving goal, donate the money to that cause in your child’s name.
- Involve your kids in major purchases.
Deciding where to go on vacation? Buying a new appliance? Include your kids in the process and have them help with the research. You can show them the factors that go into making the decision and have them help you compare the options before making the purchase. They’ll feel proud to know they helped with the research to make the best decision for the entire family.
In short, teaching children about finances can be easier than it might seem. It just takes a bit of planning, a little patience and some creativity. Once your child learns the basics of finances, you can increase their financial responsibilities by adding to their allowance and helping them open a savings and checking account. These lessons will help your child develop a healthy attitude towards money as they grow into adults.
These tips were shared by our team at Educators Credit Union and our partners at GreenPath Financial Wellness, a trusted national nonprofit.