It’s important to start teaching kids about money at an early age and get them into the routine of spending and saving smartly. Here is some advice for teaching your kids how to be smart with their money:
At What Age Should I Introduce My Kid to Money?
Parents should be looking at ways to introduce money to their children as young as the age of 5. Conversations should be kept to the basics, such as the difference between coins and bills. As children get older, the conversation can become more sophisticated by introducing the fundamentals of money and money management. Also, when you open a bank account and begin to offer an allowance, create experiences that will help them become comfortable with ATM’s, writing a check and standard banking fees.
How Can I Get Them Comfortable with Saving Money?
Giving your child money at too young of an age can be both confusing and dangerous (i.e. coins, etc). Instead, use the concept of bartering. For example, trading a toy for a snack. This action teaches how financial transactions are conducted as well as the value of items.
Next, introduce a piggy bank. Keep them focused on what it is by allowing them to decorate it so they feel it is theirs. From that point, take steps of placing money in the bank such as tooth fairy money or a lucky quarter you give them each week.
Never forget that your child looks up to you and monitors your behavior. Take your child shopping with you and speak to them as you are making decisions. This way they can observe while learning new techniques.
Should I Give My Child an Allowance?
The first point to highlight around allowances is that it’s a privilege. That being said, it can also be a very beneficial learning tool. It is always more beneficial to give allowance in exchange for help around the house. If you are unsure how much to give your child, start low and increase the amount as they take on more tasks and chores.
The goal of an allowance is to give your child the ability to have their own money and the freedom to do what they want with it. An allowance should also help them learn the value of a dollar. We want our children to realize how hard they have to work to make that money. Blowing it the minute they get it means having to redo specific tasks to get it back.
If you offer an allowance, consider making them pay the bill sometimes when you go to a restaurant. When taking your child to dinners that cost $6 – 10, have them cover the cost occasionally. In addition to building math skills like counting, making change, checking the bill and calculating the tip, they will learn the relative cost of things.
How Do I Teach My Kid To Manage His Income?
When I was 9, my parents urged me to get a job delivering newspapers. This taught me independence and responsibility. At this point, my folks did not have as much control over how I spent my money, so instead, they guided me through example and suggestions.
Try some of these techniques when you child starts earning:
(1) Introduce the basics of what children need to survive and have them contribute. Set financial goals such as paying for their computer, buying a new car or other big-ticket items.
(2) Role-play: As they begin to make money, slowly stop offering or providing them with random cash. To keep from awkward situations, role-play through discussion how situations will play out if your child runs out of money so they are aware of the outcome. Having your child being aware of the outcome before it happens may keep them from bad money decisions.
What’s a Good Age to Open a Bank Account?
Set your child up with a bank account as soon they begin earning or receiving money from relatives or holidays. We recommend you open a joint high-yield savings and checking account so they can begin to earn interest. By having a joint account, you will be able to monitor their spending habits as well as transfer money when needed without paying wire transfer fees.
As we hinted at in the first question, try introducing the concept of a bank to your child as soon as possible so when they have an account, they can understand the correct way to use their debit card and avoid overdraft and ATM fees.
Should I Force Them to Put Money in Savings?
Never force financial decisions onto your children. Instead, make saving interesting. When opening their first bank account, ensure a savings account is included, that way they become comfortable of having both a checking and savings. Position their savings account as a place to meet goals. Saving to save is not exciting to a child, but creating a goal can be.
About the Author
Alex Matjanec is the co-founder/media and communications manager of MyBankTracker.com (see link below).
With an extensive background in web and social marketing that bridges the gap between creative services and media, Alex co-founded MyBankTracker to bridge yet another gap: the one between the offerings of traditional banking websites and the real needs of consumers.
Having contributed to the online consumer interface development of several major financial institutions, including TIAA Cref, ING Direct, Ally and TD Bank (formerly Commerce Bank), Alex and his team developed MyBankTracker.com to provide a more consumer-oriented banking information portal. Combining a clutter-free, easy-to-read interface with social integration, including peer bank ratings and reviews and community Q&A forum, MyBankTracker.com leverages the lessons learned in marrying the communication needs of banking institutions with consumers’ desire for transparency and ease of use.