Written by Zac Beckerley, CFP®, Wealth Manager
Teaching your kids about money is essential for many reasons. For starters, you want them to make smart financial decisions throughout their life. But also, the better they are with money, the less likely they are to ask you for it, right? We can only hope.
It’s estimated that only 30% of students in public schools currently have access to financial literacy classes, which help them make better monetary choices in the future. But with limited access to financial education in school, students are left to get the information elsewhere — from friends or family — or not at all, which is problematic.
Although there’s only so much information kids may retain, there are fun and engaging ways you can help them become financially literate. April is Financial Literacy Month, so it’s a great time to discuss how to teach our children about finances. With my three children — aged 11, 9, and 5 — I’ve learned a few lessons along the way. Today, let’s explore how you can teach your children about money at any age.
Where (& when) Do You Start?
- Preschoolers and kindergarteners: Start with counting objects, then progress to counting coins and dollars. You can also teach them about exchanging money for objects.
- First to fifth graders: This is the right time to introduce earning money via allowance or by doing chores. Earning can lead to teaching them about saving money — including the benefits of saving and how to do it — and the difference between wants and needs.
- Sixth to eighth graders: By this stage, you can teach them about earning an income, budgeting, and giving to others.
- High schoolers: Teenagers can learn how to manage a bank account, and start understanding how credit cards work. This is also a good time to discuss how to pay for college or other education.
With my kids, we used gifted money (such as for holidays or birthdays) as a starting point. Our kids get a Ziploc bag to use as a wallet. The clear, see-through bag provides an important visual effect for children to see how much (or little) they have saved.
When they began asking for specific toys, going to the store and looking at prices helped them see if they wanted to save up for it or buy something less expensive right away. Let’s explore additional tactics you can use to teach kids about money.
Tactics for Teaching
Your methods for teaching your kids about money will depend on your family. Here are some ideas you might consider:
- Have regular conversations about money; focus on making decisions around spending and saving.
- Give your kids an allowance (even if it’s a small amount), so they can make personal financial decisions.
- Get the kids involved in charities and teach them the importance of giving back.
My children set up an art stand to raise money for a Texas preschool affected by Hurricane Harvey. As a family, we also participate in other charitable efforts. This can be a difficult lesson to teach children, and leading by example always helps.
Engaging in what your children learn about finances at school is also a smart approach. For example, in a grade school class, my oldest child learned about the stock market. It might be difficult for kids to grasp the concept of companies growing in value, but understanding how stocks work is a good place to start.
You might also consider using your kids’ interests to teach them about money. For example, using digital accounts can help them pay for video games, phone apps, or even saving for equipment so they can join a sports team.
Once they get closer to driving age, discuss how they’ll pay for a vehicle, car insurance, and gas. You can pair these tactics with tools for teaching kids about finances.
Tools for Teaching
There are many available tools to guide financial conversations and show your kids various aspects of managing money. Here are a few you might consider using:
- The Greenlight app teaches kids and teenagers about banking and investing. The app allows parents to tie allowance to chores for direct deposit, and families can set savings goals. Users can also research stocks and ETFs and learn more about money via in-app games.
- Head to the S. Mint Coin Classroom website to access educational resources, including games, activities, and coloring pages related to finances.
- Get a picture of the future with Jump$tart’s Reality Check, a quiz that calculates how much a dream life will cost. The quiz is backed by the Jump$tart Coalition, which promotes financial literacy and supports financial education.
- The Consumer Financial Protection Bureau website has educational resources for young children to young adults. Get conversation guides to discuss credit cards and saving money, or see a list of financial books to read as a family.
Modeling Good Financial Behavior
No matter how old your kids are or what stage of learning they’re in, it’s always important to model good financial behavior along the way. Of course, this will look different for every family, but a child’s upbringing plays an important role in their relationship with money.
There are many different approaches to teaching your children about money. But most importantly, don’t be afraid to talk about money. It’s a critical part of raising financially literate children. The more you have these conversations, the more financially independent your children will be. And Financial Literacy Month is the perfect opportunity to get started!
For professional help with having these financial conversations with your children, speak with a wealth advisor at Merit Financial Advisors today!
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Merit Financial Group, LLC, an SEC-registered investment adviser. Merit Financial Group, LLC and Merit Financial Advisors are separate entities from LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.