Starting financial education at an early age is key to building financially responsible adults. While the kids are home participating in distance learning, now is a great time to add some financial literacy lessons into the day. Here are some ways to teach kids of all ages the importance of saving and money management during financial literacy month.
1. Young Kids: Teach the Importance of Saving
For kids under age six, you’ll want to focus your financial literacy activities on saving money. Young kids love putting the money they receive as gifts or for completing tasks around the house in their piggy bank. Let your child help pick out a piggy bank they like. A clear option can be very powerful as kids will be able to see as they “earn” more money. Be sure to regularly count the money in the piggy bank so they can begin to understand how they have more money from month to month.
At this age, you can also begin to show kids how saving money works. If there is a toy your child wants, explain to them how much it costs and help them come up with a savings plan to reach their goal. Make sure the goal is realistic so they can accomplish it in a few months. When they have reached their goal, let them take the money from their piggy bank to the store and make the purchase.
2. Older Kids: Start Talking About Interest
When a child is in elementary and middle school, you can begin teaching them about more advanced topics. Come up with an allowance plan where they can earn money for helping out around the house. Tell your child that if they save all of their allowance money for a month, you will give them an extra dollar. This can help introduce the concept of interest.
Setting up a bank account for your child is the next step. Explain to them that they are going to take all the money from their piggy bank and bring it to the bank to make an account. Tell them that the bank will pay interest for keeping money there. Be sure to show them the bank statement each month so they can see the money they are earning.
3. High School Kids: Teach About Loans and Credit
At high school age, young adults can begin to understand how loans work. If your child wants an expensive item, like a new phone or iPad, tell them they can wait and save the money or offer to loan them the money with interest. This will begin to teach them how loans work and that sometimes it is better to wait and save the money.
Be open with your child when discussing college costs. Show them how student loans work and how much they would have to pay back per month. If your child knows what field they would like to go into, you can help them create a sample future budget based on potential income.
You may also want to have your child apply for a student credit card at this age. Help them understand the importance of paying off the balance each month and not overspending. Explain how being a responsible credit card user will help their credit score in the future.
Be Open About Money
One key to teaching financial literacy is being open with your child about money from an early age. Involve them in appropriate family money discussions and ask for their opinion. Show them how the family saves and budgets. These conversations and the above tips will make your child more comfortable handling money.
Remember, we are always here at Reliant Bank to help you open an account for your child and discuss saving strategies. You can rely on us for savings help.