Money may not be a traditional conversation topic around the dinner table, but this is quickly changing. Today, more and more families are embracing the importance of teaching financial literacy at home. That’s great news.
As a parent, you are your child’s biggest financial role model. There’s a lot they can learn from you.
Also, many kids don’t gain all the financial skills they need at school. According to the University of Chicago, about 50% of high school seniors say they wish they’d had more financial education at school, and only a third of states require students to complete a personal finance course to graduate.
Why Financial Education Matters
By talking to your children about money, you can:
Influence their money habits. Regular conversations help your child form a healthy attitude toward money and adopt responsible financial behaviors.
- Normalize financial conversations. Kids are more likely to come to you with concerns if they’re used to discussing money with you. Be open about financial topics and encourage questions.
- Provide reliable information. When it comes to essentials like budgeting and borrowing, don’t expect your kids to get the best information from TV, the internet or their peers.
- Prepare them for the future. As an adult, your child will face big financial choices, from opening a credit card to buying a home. Your guidance now can help them make informed decisions later.
Build Money Skills Early On
It’s never too early to start introducing money concepts. Preschoolers, for instance, may enjoy counting activities that teach them about coin values and how to compare amounts of money. By high school, kids should have some financial responsibilities of their own and know the basics of budgeting and saving.
4 Real-Life Money Lessons
How you teach kids about money should change as they grow. Here are a few areas to focus on.
1. Helping Them Budget, Spend and Save
As your child enters middle school, bring them into some family financial conversations, such as budgeting for a vacation, saving for a home improvement project or finding ways to trim costs when needed. Being active in real-world financial discussions helps them see the financial choices you face and decisions you make.
Avoid talks that may make younger kids feel stressed, worried or guilty about your family’s finances. The goal is only to introduce them to considerations that come with planning your household finances.
- Account Management – Mock up monthly or weekly “bank statements” to help them track their finances.
- Saving – Create a separate “savings account” to which you pay interest (such as $1 a week for every $10 they’ve saved). This helps encourage long-term saving.
- Borrowing – Lend them money for larger purchases, with the understanding that future allowance money will go toward repayment.
2. Including Them in Family Discussions
A dishonest employee may exploit weaknesses in a company’s commission policy to claim unearned commissions or bonuses.
Best practices: Review your commission program regularly and make sure its policies work as intended and are enforced. For example, sales reps shouldn’t be able to keep commissions for sales that go uncollected. Also, closely monitor your company’s finances to make sure commissions are in line with performance. If commissions are up when sales are down, that’s cause for concern.
3. Sharing Your Own Experiences
Opening up about your past financial mistakes and their consequences shows your child the importance of smart money management and may help them avoid similar mistakes.
4. Letting Them Make Mistakes
Kids learn lessons best when given the freedom to make their own choices. If you always intervene, even with the best intentions, your child won’t benefit from the growth opportunities that come with little mistakes along the way. For example, if your child spends their allowance on candy rather than saving it up for a game they really want, they may wind up with buyer’s remorse. That’s OK.
At this age, the stakes are lower. It’s better to let your child waste a few dollars now if it helps them avoid a much costlier mistake as an adult. When they do trip up, help them discover where they went wrong.
Start With Savings
Now is the time to introduce your child to some of the financial essentials that will serve them throughout their lives. They’ll thank you later.
Help them take a key step on their financial journey by opening Amegy’s Young Savers account. Designed for customers age 25 and younger, it’s a great way for them to start earning interest, learning banking basics and saving for their future.