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It’s never too early to learn money management, and the back to school season is an especially good time to involve your kids in spending decisions. Despite the value in early financial education, many parents have difficulties starting the aren’t sure how to start the conversation with their families. A 2018 T. Rowe Price survey found that 42% of parents are at least somewhat reluctant to talk about financial matters, and 22% said they never had financial discussions with their kids. Unfortunately, the lack of education at home isn’t addressed in schools, as many don’t even teach finance classes.
At Nuvision, we believe that financial literacy is essential. For the past few years, we’ve held an essay challenge to educate teens on finances and provide scholarships. But parents still play the most important role in developing a child’s attitudes towards money, so we wanted to help make that process easier for those who might be wondering where to start. Here are our top tips about teaching kids about money:
Don’t wait until your kid already has a job and is out in the world spending to talk about money. The older you get, the more costly money mistakes become, so it’s better to begin when they’re young. It’s much better learning a lesson by losing a few dollars, rather than a few hundred.
You can judge when the best time to start might be, but generally kids are ready when they can understand the basic math behind spending. A study from researchers at the University of Cambridge found that kids start developing a sense of the value of money by seven years old.
Teaching younger kids could be as simple as giving them their own lunch money and letting them decide how to spend it or explaining the costs on the receipt after a shopping trip. With small, age-appropriate lessons and responsibilities, kids will begin to build an understanding that sets them up for success in their teen and adult years.
If you’re saving to get out of debt or to go on a vacation next year, explain to your kids what that means. Show them the trade-offs. When you take the kids to the store to buy new clothes or backpacks for school, make it clear you won’t buy unnecessary things because you have a goal to work towards.
Telling every detail about your income and monthly bills isn’t necessary—but it is important to share some of the reasoning behind the decisions you make. Even if you made bad money decisions in the past, share them, and explain what you’re doing to fix them, so your kids can avoid making those same mistakes in the future.
As soon as your child starts earning money, whether from a job or a weekly allowance, show them the importance of being intentional in how they use it. For younger kids, a visual system can work well. Give them three envelopes, one labeled spend, one labeled save, and one labeled give. Teach them that once the money is gone, they’ve spent it. There’s no taking cash from savings to spend today.
If your child is older, helping them open a checking account can teach other important lessons. Since you are a joint-owner of the account, you can keep track of their spending, set limits, and receive alerts. This is one of the best ways for a teen to learn about banking. They still have control over their account, but you have oversight and can have conversations about the decisions they make—something that isn’t always possible when they’re older and completely responsible for their own decisions.
As activities and expenses pop up throughout the school year, they’ll learn to prioritize and figure out where the best places to use their money are.
A one-time lecture about the joys of financial management won’t cut it—more likely it’ll leave a child bored and disinterested. To set a kid up for success, you need to make it exciting, and continuously be setting a good example yourself.
Kid look to their parents to learn how they should act. They take notice of the things you do and incorporate them into their own lives. If you are sticking to your budget, showing them the things you are saving for, not buying things on impulse, and making use of resources you already have to save money, your kids will notice.
Sit down with your child and brainstorm some things they would eventually like to buy or do. For younger kids, this might be a new video game or toy that they have to save to get. For high school age and up, you’re probably looking at saving for college, a car, or an upcoming school trip.
Equip your kids with the tools they need to work towards their goals. Teach them the more they spend on little things now, the less they will have to put towards the big thing later.
Learning good spending habits and financial skills early on is the key to a lifetime of success. Nuvision offers a basic account for our younger members, aged 13 to 23. With no monthly fees or minimum balance requirements, it’s the perfect tool for beginners to learn the basics of finances and budgeting. To learn more about Nuvision’s Young Adult Checking accounts, click here.