Want to be sure your children develop healthy financial habits before they’re out on their own?
You don’t have to wait for them to take classes in money management in high school or college. Instead, using real-life lessons that come up naturally every day, you can become your kids’ personal finance coach—starting as early as preschool.
Think about it: Every time you’re at a store, the bank, or a restaurant, there are opportunities to set a positive example or have a “teachable moment” about money. With that in mind, here are some age-appropriate ideas to help get you started this summer:
Preschool and Kindergarten
Children often start paying attention to how money is used and what it can buy before they can even count. So why not make the most out of their curiosity?
- Little ones love to copy Mommy and Daddy. Include them in trips to the store when you can, then imitate the experience with play money at home. As they get older, your kids can help you download coupons and make smart choices as you shop.
- Be mindful that as your children’s role model, your own behavior and the language you use when you talk about money can make a difference. Try to keep a positive attitude and avoid complaining or arguing about finances in front of your kids.
- This can also be a good age to start a piggy bank. You might want to get one that’s clear, so your kids can watch their cash stack up, even if it’s just a quarter or dollar at a time. Encourage them to set a savings goal, and to put cash gifts they receive toward that goal.
- If toy-store tantrums are sometimes a challenge, it might help to have a chat about saving up for special toys—then make a fuss when the kids pay with their own money. If you’re paying, set a dollar limit ahead of time, then help your kids do the math while they shop to determine what they can afford.
First to Fifth Grade
When children move on to elementary school, you can take the lessons up a notch.
- Though 83% of respondents in a 2022 CNBC + Acorns study said parents are the most responsible for educating their children about money, 31% of the parents polled said they never talked to their kids about household finances. You don’t have to share exactly how much you earn or worry them if you’re in debt. But you may want to discuss family budget basics, such as how you set priorities and manage unexpected expenses, and how inflation and other factors can affect what you have to spend.
- If you feel your child is ready for some household responsibilities, it may be time to talk about an allowance, or earning money for doing chores, getting good grades, etc. Try to be clear about your expectations before each “payday.”
- Consider opening a savings account in your child’s name. Most financial institutions offer some type ofjoint bank account for parents and kids. This is a prime time to talk about long-term savings goals and the “magic” of compounding interest.
- If you haven’t already, you may want to have conversations about wants vs. needs, impulse buying, the value of negotiating, and how borrowing—even from Mom and Dad—can come with a cost. Brand-conscious kids, especially, may benefit from a lesson in all of the above before back-to-school and holiday shopping.
Sixth to Eighth Grade
As your kids get older, you may want to introduce some higher-level concepts to the mix, such as volunteering, giving to charity, and being happy with what you have.
- Many high schools have a community service requirement and, of course, volunteering looks great on a college resume. But younger kids can also benefit from contributing their time and money to causes they care about. Giving back can help tweens and teens feel good about themselves and build empathy for others.
- This is also a good age to talk to kids about finding contentment in what they’ve earned and not just what they’re given.
As your child becomes more independent, your early lessons about money management will start paying off. But there’s still more to do.
- You’ll probably want to open some type of checking or debit account for your child. There are many youth bank accounts and apps geared to students, so it’s important to compare the pros and cons. This may also be a good time to talk about how credit cards work and whether it’s time to open an account (with limits).
- If your child gets a seasonal or part-time job, you can talk about their plans for that income. Even at this age, kids can benefit from a budget that includes saving for college and/or a car, as well as spending on clothes, videogames, and other nonessentials. You also can chat about income taxes, an hourly wage vs. a salary, and the benefits of contributing to an employer’s 401(k) plan (if it’s offered).
- Looking for a fun way to talk about investing and how the markets work? Some financial institutions offer kids an opportunity to purchase fractional shares of their favorite brands, or you could discuss the purpose behind your own portfolio choices.
- Something else that could benefit your children—in a way they may not appreciate until they’re much older—is a conversation about student debt. You can help them understand their educational options and the costs, how different types of financial aid work, and how student loans could impact their goals for years, or even decades, after they graduate.
It may be hard to imagine it now, especially if your children are small, but you’ll likely still be teaching them about money when they’re in college and beyond.
(They also may teach you a thing or two, so keep an open mind.)
Be ready: Some of the toughest conversations may come when you decide to drop your kids from your car insurance, health insurance, cell phone coverage, and—gasp—your streaming account. There may be pouting … or even tears. (Some things never change.)
If you or your kids need advice at any stage, keep in mind that your Octavia wealth advisor is always ready to answer questions or serve as a sounding board.
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