Have you tried teaching your children about money and wonder if these efforts make an impact?
As I happily learned, these lessons do stick. According to the FDIC, “Parents are the primary influence on a child’s future financial well-being…” And, our children learn these lessons in the least expected ways.
My daughter had a milestone birthday recently and her grandparents gave her a large monetary gift. I suggested she open a savings account for these funds. “Will it pay interest?” she asked. I did not expect this question!
She explained that she remembered that I paid her weekly interest on her savings when she was in elementary school. “I didn’t know what it was at the time, I just knew the more money I had, the more you gave me,” she said.
When laying the foundation for later learning, experiences are more impactful than conversations.
So, what kinds of experiences can you provide your child through the ages? Here are some suggestions:
In early elementary school, give them a regular allowance
You can start with a dollar a day at the age of five or six. Use this opportunity to teach your child how to identify and count coins. For example, start by giving them ten dimes daily, and teach them how to skip count by tens. Then introduce nickels to practice skip counting by fives, etc. You’ll reinforce skills they’re learning in school.
As they receive an allowance, let them make independence financial decisions—saving, spending, or giving. Resist judging their choices. If they regret a decision, ask them what they’d do differently, and allow them to come to their best conclusions. At this young age, learning the natural consequences of their decisions is a safe way to build their experience.
Introduce interest
Once your child has adjusted to the predictability of a regular allowance, reinforce savings by giving them a meaningful amount of interest at regular intervals. I learned this idea from First National Bank of Dad by David Owen.
At this young age, a bank rate of 0.01% on $3 won’t make an impact. Consider giving them 5% or 10% weekly or monthly so they can factor meaningful interest into their savings goals. Also, if your child spends their money and asks for more, you can use this opportunity to charge interest on a loan and teach them the consequences of debt.
Open a checking account
When your child reaches middle school and begins meeting friends at the mall or at restaurants, open a checking account for them. Most banks offer joint checking accounts for children and parents that children can access through debit cards and review with an app. They can see their spending history easily which, over time, will help them understand their spending decisions and make them less impulsive.
It also eliminates the need to carry cash, which is easily lost, when they are out. If their balance continues to grow, open a savings account to separate large savings from regular spending cash.
Teaching your children about money can a simple process. These experiences, combined with regular conversations, will help establish a sound financial foundation early.
For ideas on how to teach your kids financial skills through travel, check out our series on traveling with young children, pre-teens, and teens.