Raising Financially Savvy Kids
Ever wonder if your kids appreciate the value of a dollar — especially during the spend-happy holiday season? According to Andrea Travillian, author of Little Kids Big Money: Tools for Teaching Kid Friendly Finance, kids aren't born with innate financial knowledge. "Some kids are natural-born spenders, while others are natural savers," she says. "But they all need financial guidance."
Learning the art of sound spending and sage saving doesn't happen overnight. Read on for age-specific strategies to help build healthy financial habits.
Dollars and sense
Ideally, financial training should begin in the early toddler years before kids are old enough to carry a kid-size wallet or handle money of their own.
Parents can model the importance of budgeting, letting young children help plan shopping lists, shopping around for the best deal and distinguishing needs from wants. ("Your body needs healthy food like carrots, and that's what we're buying today. That sheet of stickers is something you want, and that can wait.") Resist the urge to scoop up strategically positioned toys and candy at the register (even if kids beg for them). Saying "no" to impulse buys shows kids the importance of planned spending. Kindergarteners are often ready to begin receiving a small allowance, says independent financial planner Karen Keatley.
Some families give one dollar per year of age; others choose a larger amount and split it between spending money and a savings account in the child's name. Keatley chose the latter option for her two children. "They never touched the money in the bank," she says. "But they always knew it was there."
Are you drowning in requests to sell cookies, wrapping paper or who-knows-what for your child's school or club? Fundraising drives that pepper the school years are full of financial value for kids, Travillian says. Fundraising can begin to teach young children the concept of working for money along with the reality that activities and organizations they enjoy cost money to maintain.
To turn fundraising into a lesson in finance, make sure kids know how the money they're raising will be used. Most importantly, children should do the majority of the fundraising work, Travillian says.
"Don't take the order form to work for them. Make them come to work and ask for the sale. Make them call their grand-parents. They should be the one in the driver's seat!"
Checks and balances
The best way for tweens and teens to learn the joy of a dollar earned is to let them earn their own money. According to Keatley, a part-time job is a must for teenagers.
"Earning their own money and making their own financial decisions is a key experience," she says. "It helps them to learn the connection between working and having money in the bank."
Kids who don't work during the school year can have jobs during the summer. Along with a teen's earnings, allowance from parents for clothing or incidentals can be deposited into a checking account, so teens learn to balance statements themselves. And no matter how much they whine or pout, avoid doling out more money or repeatedly rescuing teens who come up short at the end of the month. Instead, create a spending plan that shows income, expenses and goals.
It's all about making sound choices, Keatley says. "Teens need to understand that they may not be able to have a latte every day and the designer jeans, too."
Malia Jacobson is a nationally published parenting journalist and mom of two.