April marks Financial Literacy Month, a perfect time to turn our focus towards raising financially savvy children. Today, the concepts of money and transactions are rapidly evolving, and it's more important than ever for parents to lay a solid foundation of financial literacy for their kids. Here's how you can give your kids a jumpstart to a brighter financial future.
Robin Tooms, chief marketing officer with Members Choice Credit Union explains ways parents can teach their kids financial literacy.
Starting Early: The Path to Financial Wisdom
When should your journey into teaching kids about money management begin? Research and practical experience suggest that as early as five years old, children start forming basic concepts of saving and spending. This early stage is pivotal. Whether it's understanding the transaction at a grocery store or saving coins in a piggy bank for a desired toy, these are foundational moments. By the age of 10—a stage when over 42% of kids already own a cell phone—your child is ready to grasp more sophisticated financial concepts. The digital age has transformed how children interact with friends, family and yes, businesses.
Essentials of Money Management: Save, Earn, Spend, Protect
Here are key principles and practical tips to instill a healthy financial mindset in your children:
- Start with the Basics: Emphasize the importance of saving, earning, and spending wisely. Encourage them to save a part of their allowance or earnings from chores. This teaches the value of money and the satisfaction of reaching a goal. (Hint: Look at Pinterest for some inspiration on savings goal trackers.)
- Open a Savings Account: Introduce them to the concept of a savings account where they can watch their money grow through interest. It's a tangible way to show how savings can accumulate over time, offering both security and opportunities.
- Open a Checking Account: If your kid is between ages 10-17, then a checking account is perhaps the most direct method to teach financial management because kids can start learning by doing. It offers a practical experience in depositing money, tracking spending, and understanding the growth of savings through interest.
- Budgeting for Goals: Help them set and budget for personal goals, be it a new game or a gift for a friend. This introduces them to planning and prioritizing their spending.
- Understanding Credit: As they grow, discuss the importance of good credit and how it affects future financial opportunities. Real-life examples can be very effective here.
- The Value of Money: Regular discussions about money, including earning, spending, saving, and donating, can help children appreciate its value and the responsibility that comes with it.
- Discuss Digital Money: In an age of cash apps and digital transactions, it's vital to teach the basics of money that a checking account can offer, beyond the convenience of digital payments. Discuss the “red flags” for scams and frauds for people or businesses asking for too much personal information for a transaction.
Where to Find More Resources
For more resources, programs like Lemonade Day provide invaluable lessons on money management and entrepreneurship. Additionally, Members Choice Credit Union offers a wealth of resources tailored to young savers and spenders, designed to foster a healthy financial future.
Instilling financial literacy from a young age is a gift that keeps on giving. By taking these steps, you're not just teaching your children how to manage money; you're setting them up for a lifetime of financial independence and success.
