There are some keys to assisting your children with a financial plan as they grow up.
Parents can greatly influence a child’s financial planning in order for them to be mindful consumers, investors, savers, and givers.
We offer crucial financial lessons for you to take the time to teach your kids at each age range and stage.
I know it might be hard to believe but don’t underestimate your children at this age. In order for them to understand the basics you need to establish with them the idea that there is a difference between a need and want. You can create a collage with your children using photos from magazines or the internet and have them decide which column it goes in either need or want.
Another is focusing and persisting through tasks. In order to start saving for retirement you have to teach them early on about patience. Explaining tradeoffs to them through discussing out loud at the grocery store comparing prices and how much you’re paying for each item.
Giving them a piggy bank to start gaining a better understanding of three aspects saving, spending, and sharing. Have your children do some chores and in return give them an allowance for them then to pick which part of the piggy bank it goes into.
During this stage you would want to talk about the different types of families around the world. Explaining that a variety of households have different incomes. Teaching them that that section of share in their piggy bank could go to these families that are living in poverty.
Sharing your family’s story can help them understand past ways of spending money to show them how spending habits can help through positives and negatives that life throws at them. Another idea is for you to open them a bank account for them to add their saving into to start building interest.
As your children become young adults it is time to discuss more challenging concepts with them. Sharing what is it like having a credit card and that interest increases unless the balance is paid off and that any late payments hurt your credit score. Getting themselves, a job is good way for them to learn managing time, effects of taxes, and being a part of a team with a boss. Setting long-term goals with them for their future would give them the confidence and show them saving for larger items like a car or college.
Start the conversation
It is important as a parent to start your kids early on talking about money. It is more than just cents and dollars, you are teaching them about decision making, developing values, and could empower them to take control of their financial futures.
Sources: T. Rowe Price 2019 Parents, Kids & Money Survey; Forbes; Inc. magazine; CNBC Millionaire Survey; U.S. Consumer Financial Protection Bureau; Sallie Mae’s 2019 Majoring in Money report; mtmfec.org