Kids and money. They sure require a lot of it, right? But teaching kids about money is not something that we normally give a lot of thought to. We just handle it for them. Unfortunately, I have learned the hard way that kids grow up faster than you realize. It really does fly by. And while it’s easy to “let them be kids”, we have to also realize that it is our job to prepare them for adulthood and teach them life skills. That is what they will need to survive and make good choices in the future.
When should you start?
No person is exempt from needing money. We all have to have a means of support to get by in the world. I have been surprised to learn that some people really don’t talk to their kids about money. Developing healthy spending habits is one of the best things you can do. This will help your children in the future when you are not there to help them. So when should you start instructing kids about financial literacy? Well, the answer is RIGHT NOW.
How old should they be?
Even very young children can begin understanding the concept of money, especially if you talk about it. My children are a bit older now but one of their favorite toys as younger children was the pretend cash register sets. We spend a lot of time purchasing items for the little kitchen to be grilled on the little grill. It is a great time for little ones to gain some small understanding that they need to give something to receive the groceries. They won’t understand that they are learning economic literacy. But you are equipping them with knowledge and they will appreciate it later in life.
Photo by Jordan Rowland on Unsplash
HOW TO TEACH YOUR KIDS ABOUT MONEY…
Open a savings account
Even before children are old enough to do toys with play money, go ahead and open a savings account just for them. Any time they get birthday or Christmas money, or any money that they don’t really need, put it in their account. You can open the account in their name as a UGMA (Uniform Gift to Minors Act) custodial account. This will start them off on the right foot with saving and when they are old enough, they can help you to make the deposits. When the statement arrives, show it to them and let them see how the money grows with interest. Also, see out high-interest kids’ accounts. In my local area, we have a credit union that pays 6% on the first $1,000 in a kids account and about 1-2% after that. They also cash in the change without charging a fee.
Discuss wants and needs
As your children grow, it is important to discuss wants and needs. Talking about these will help them to understand the difference and that will affect their decision making. When they have a “want”, price out different options and let them participate in the decision making. This is a great exercise to equip children to be responsible with their money and give thought to how it is spent. Make a list. When you make purchases, let them decide if it is a want or a need.
Let’s play a game
Another way to introduce the concept of money is to play a board game, the “Game of Life”. This is a super fun family activity that also lets them learn. My boys are now nine and fourteen and still love this game from time to time. During the winter when you need activities to keep busy, this is a great activity (and they are learning without even realizing it)!
Take a family trip to the bank
Taking kids to the bank is a wonderful activity to teach kids to handle money. I have done this for years, taking them in if I can and actually depositing their own money. Some of the banks have really fun and special things when the kids come in. Our bank gave the kids an “I am a saver” sticker and a sucker. They also let them ring the savings bell where everyone claps. It is really cute and the kids love it. Also, when my boys cash in their change. It is such a fun activity for them to guess how much it will be. On the last trip, both of mine cashed in a little over $60 each which was a nice addition to their accounts.
When kids start working, open a ROTH IRA
As soon as they start working, start a custodial Roth IRA. As a CPA we make many recommendations on retirement accounts. And this is one of the best! As long as your child has earned income, they can open a Roth. That Roth can grow tax-free for years and the returns of starting it at such a young age are AMAZING! This is the thing in teaching kids about money that I recommend the most. Teens won’t understand it at first, but they will certainly appreciate all of the money they make from it later in life.
Get your teen a checking account
When teens get older, take them to the bank and get a checking account. Now I know that these younger generations hardly know what checks are, but it still important for them at least to be shown because chances are, they will encounter checks in their lifetime in some form. My older son is fourteen and we are going very soon to open an account. He will be issued a debit card, and we will train him on how to do banking and responsibly use that card. It will be a great training exercise for him under our supervision. Of course, we will set it up to have access to the account to monitor and make sure that it goes okay.
Teaching kids about money will set them up for success
Teaching your kids to handle money is something that can benefit your children for life. Talking about money, practicing making good choices, and having monitored accounts can all help in setting your child up for success. I can’t think of a more beneficial skill to teach at any age. If you are interested in learning more about saving with a family, check out my post on Why should have a Christmas Club – an amazing way to shop guilt-free! So grab a few bucks and a handful of coins, and get that conversation started today!
Mrs. Accountable
Niraj says
I love your suggestion on getting the teen kids a checking account, especially making them full out the check. I will definitely use this idea. Thanks!
Candace says
This is great info! I think I’ll set-up a bank account for my kids soon.
Andrea says
Great post. Do you ever use prepaid cards with your kids, such as in the tween years?
cbrooks0312@comcast.net says
I have not done the prepaid cards yet but I do plan to! I think that it will be perfect for my nine year old.
Dee | Grammy's Grid says
Good tips! Thanks so much for linking up with me at the Unlimited Link Party 29. Pinned!