There are many everyday opportunities to help kids learn about making smart money decisions. From setting savings goals to shopping together, we have some ideas to get you off to a great start.
Just like with other healthy habits, your ability to set clear goals and delay gratification can make or break your finances. Teaching this concept is critical to helping young children avoid money troubles later in life.
For example, saying “no” to purchasing the next-generation mobile device today could keep you on target for buying a new car next year.
Goal setting is necessary
Work with your children to set a savings goal related to their interests. Otherwise, they may see it as a pointless activity. Encourage a short-term goal that’s linked to buying a special toy or paying for a fun experience. Help your child brainstorm a list of possibilities. Settle on the item and expected cost.
Use a calendar to establish a short-term savings timeframe. For example, saving $100 over 20 months might cause a child to lose interest. But the same amount over 10 months may keep them motivated. Offer to match their savings when they reach a set amount.
Introduce the concept of a budget by letting them earn money toward their goal. Income sources include an allowance, extra chores, birthday money, and holiday gift money.
A colorful goal setting chart can make the entire process fun and exciting for your little one. Let them add stickers to the chart each time they make progress toward their goal. This might be when they say “no” to an impulse buy, make a savings deposit, or earn money.
Saving isn’t optional
You can build good habits early by making savings required. If it’s an expectation that a portion of birthday money, allowance or other income goes into savings, then it becomes routine. Establish a set amount, such as 10%, to develop a consistent habit. Then, each time your child receives money, encourage them to deposit it into their youth savings account.
Take advantage of kids’ desire to “play grown-up” with a trip to the bank to deposit their money. It will make them feel even more accomplished to make the deposit themselves. And, they will be encouraged by their banker. At The Bank of Missouri, our team always takes joy in seeing our youngest savers make plans for the future.
Mistakes are welcome
We naturally want to protect our children from harm. But making a financial mistake in grade school can be a learning experience and isn’t likely to cause lasting damage. Allowing your little one to make a money choice they might regret can be hard at first. But it may be more effective than trying to explain that once they spend the money, it’s gone.
Give your child permission to spend $5 in their favorite store. After they pay for the item, they may catch on that they have to give up something (money) to get something (toy or candy). They may regret the purchase they made when they see something they want more the next day. Let your child live with the purchase even if they’re disappointed with their choice. If you try to “fix” the situation, you might undo the benefits of the experience.
Shopping as teacher
Grocery shopping might be one of the best ways to teach kids about money. It provides a chance for them to choose items based on price and see the physical exchange of money for products.
Let them help plan your next trip to the grocery store. Ask for their help in creating the shopping list and finding sales. They can review the weekly ad or a store’s app to compare prices and look for what’s on sale. Older kids can also check if the shopping list fits the budget.
As you visit each aisle, use the opportunity to explain your buying decisions. This might be as simple as stating, “We can save 50 cents by using a coupon.” Or ask them to compare the pricing on generic and name brand options. It’s also a great time to chat about when to save and when to spend. Fruit may be a little more costly, but it comes with certain health benefits.
Learn through play
Look for opportunities to use play time activities as financial literacy opportunities. Work together to set up a play store and use play money to “purchase” items. Check if there’s a children’s museum in your area with related play spaces. You’ll often find play stores and banks.
Have a scavenger hunt around the house to find items that are wants and needs. Make it a game. The first to bring ten items that are needs to the coffee table wins. Or gather some items for a game of sink or float, making sure to choose and identify a mix of wants and needs items.
And, don’t forget about board games that use play money.
Teaching your little one about finance takes time and patience. But, once you get in the habit, it’s easy to work it into everyday life. The smart money habits you teach them today can stay with them for the rest of their lives.