If we want our kids to have financial literacy as adults, the best time to teach them is now.
Do your kids get an allowance?
Do you let your kids keep their birthday money? Or do you save it automatically for them?
Do you talk with your kids about wants versus needs?
Do you involve your kids in your charitable giving?
If you’re like me, you’ve likely approached these topics unevenly, haphazardly, or not at all. And if you’re like me, you know that financial literacy is an important life skill that we all want our kids to have when they fly from the nest eventually, but you don’t know where to start or just never got around to figuring out what to do about it. The good news is that whether your kid is 2 or 18 and about to leave for college, it’s not too late! And since April is Financial Literacy Month, it’s the perfect time to jump in.
First Things First, Indulge Their Curiosity
They are going to ask personal questions that may make you cringe, and that’s okay. Are we rich/poor? How much money do you make? If we can afford to go to Florida every summer, why can’t we afford to buy me a new bike?
If we don’t find the time and the will to answer their questions, they will ask someone else (probably Google or Alexa), and you may find yourself having to undo all the bad information they pick up along the way. So curb the urge to answer with I’ll tell you when you’re older, or even worse, It’s none of your business, and answer their questions.
Knowledge is Power
In order to be successful adults, you need to teach your kids some basic financial concepts:
Income: the money we have to spend. For adults and teens, this looks like paychecks from our labor outside the household. For kids, this looks like an allowance, money from odd jobs, or money received on birthdays and holidays.
Expenses: the things on which we spend our money. Here you will want to distinguish between wants and needs. Don’t spend too much time on the obvious ones — take time to talk through the trickier categories like clothing and electronics, which can fall into either category depending on the context.
Saving: make sure your kids understand the importance of putting extra money away, even if you are not in a place financially to do so right now. Talk to them about savings accounts, retirement plans, and other investments.
Borrowing: be transparent with your kids about money you’ve borrowed. Talk to them about mortgages, car payments, student loans, and credit card bills. They need to know that sometimes borrowing is necessary for larger purchases but make it perfectly clear that you should only borrow what you can realistically repay, and point out that it costs extra to borrow money— it’s not free. And please, please, please don’t skip this topic if it triggers your own guilt — you want your kids to learn from your mistakes, not repeat them.
Put It Into Practice
Once they’ve got the basics, it’s time to let them put them into practice. Start with an allowance. The spend/save/give jars are popular with younger kids (I’m getting ready to start this approach with my own kids, stay tuned!). For older kids, see if your bank offers free savings accounts. Give them direct access to their money — that may even mean getting a debit card, and let them start managing some money. And resist the urge to “save” them from their mistakes — assuming you are not letting them have full control over their college savings, they won’t do lasting damage, and they will definitely learn something in the process.
It’s never too early to introduce a kid to a budget. Give them the responsibility of planning the next family dinner and give them a budget for groceries. Sit down with the grocery store circular and talk about sales and coupons, why meat and fresh produce cost more than shelf staples, and be sure and save some room for dessert!
The Opposite of Spoiled, by Ron Lieber is a great read that covers how and why we should talk to kids about money and how to let them put things into practice.
Best Money Apps for Kids and Teens. Embrace the technology they may already have access to and use an app to help track allowances, spending, budgets, etc.
Junior Achievement, this k-12 national program has a St. Louis chapter that many area schools use to connect volunteers with students to learn about money and our economy.