Put Your Kids On The Road To Financial Literacy

Chances are you’re not going to find a book titled “The Basics of Financial Literacy” in your child’s backpack from school. But it certainly would be a helpful part of their curriculum.Boy and a Pile of Coins

If your child isn’t learning financial basics in the classroom, like how to save money, how to create a budget, or how to balance a bank account, that means the burden falls on you to teach them the financial ways of the world. Research has shown that kids who have sound money management skills, and who develop good money habits, have a greater chance of personal financial success in adulthood.

So when should you start laying this groundwork? Early on, according to experts. One of the first financial lessons you can teach your child revolves around that time-tested tool – the piggy bank. The simple act of having your child put coins in the bank on a regular basis can set the stage for learning how to save. You can even show them by example by having an “adult” piggy bank they can watch you put money into.

Once your child is a bit older, it’s time to introduce them to real-world situations where money is involved. A trip to the bank is a good place to start. Your child can watch you deposit money into a savings account, and you can explain to them that you’re putting that money aside, just like they do with their piggy bank. You can drive this point home even more by helping them to open a savings account of their very own.

Another great way to teach your child about money is to take them with you on a shopping trip. Even just heading to the grocery store is a great start. Your child can help you make a list of what you need at the store, and you can even have them add an item or two that they want. Once at the store, try to pay with cash so they can see that money is being used to purchase the items – the same kind of money that they have in their piggy bank.

If they have money of their own saved up, you can even let them bring it with them to the store. This can be a good opportunity to explain “needs” versus “wants” with your child. And, by letting them make a decision about whether to spend their money on a toy or a candy bar, or save up their money to purchase a “big ticket item” down the road, they’ll be able to start thinking about the financial choices available to them on a daily basis.

As they enter their teenage years, kids are old enough to understand the importance of creating and sticking to a budget. Again, showing by example is a good way to convey this knowledge. Let them sit with you while you pay the bills and explain what you’re doing. By showing them the importance of knowing how much money is coming in and going out of the household each month, you’ll be driving home a valuable lesson that will help them to manage their own money.

You might also consider helping your teen to open their own checking account. Since you’ll be acting as a co-owner on the account (children under the age of 18 need a parent or guardian to open a bank account with them), you’ll have a chance to oversee your child’s spending and money management habits, and step in when you see they need some guidance. By allowing them firsthand experience managing their own money, they’ll be a lot more financially savvy by the time they head out into the “real world”.

Once your teen proves to be responsible with their checking account, you can introduce them to the world of credit. Explain the basics of establishing credit and what it means to carry a balance on a credit card and pay interest on that balance. You can even walk your child through the process of applying for a credit card if you think they’re ready. And don’t forget to stress the importance of making credit card payments on time and paying at least the minimum required. A later lesson would be to show how maintaining good credit is important when it comes to taking out a car loan or applying for a mortgage.

Let’s be honest; what parent doesn’t want a bright financial future for their child? By introducing your child to the skills and knowledge they’ll need to manage their own money, you’ll be helping them to build a strong financial foundation they can take with them into adulthood.

Teach Good Money Habits with a Children’s Savings Account

As a parent, don’t you want your child to have a strong financial future? If so, the earlier you can start teaching them about money, the better. Research has shown that children start to understand the concepts of saving and spending as early as three years old, and some experts believe that money habits are formed by age seven. One way to get your child on the right track financially, is to give them a savings account of their very own.Young boy putting money in piggy bank

A children’s savings account can help lay a solid financial foundation. From teaching the benefits of putting money aside, to allowing children to discover what interest is all about, a savings account can be a great educational tool.

Some of the specific benefits of opening a children’s savings account include:

  • It gets children in the savings habit. By regularly depositing the contents of their piggy bank into a savings account, your child will foster good savings habits they can take with them into adulthood. By the time they head off to college or out into the “real world”, they’ll already be used to routinely putting money aside. As they say – “old habits die hard” – and saving money is a habit you won’t want them to break!
  • They can watch their money grow over time. One valuable lesson is that you don’t have to spend it just because you have it. Kids tend to get excited when they find themselves with a few bucks, but instead of blowing their money on candy or cheap toys, placing it in a savings account can allow them to save up for something special. It can be a satisfying experience for them to watch their money grow with each deposit they make. And, a savings account that pays interest shows a child firsthand how their money can make more money.
  • It puts them on the road to financial freedom. Using a savings account to save for something special can be a great way for your child to learn about financial independence. Rather than rely on Mom and Dad to buy them a new tablet or skateboard, they can use their own funds to make the purchase. Not only does this provide them with a sense of achievement, but it helps to teach them the value of a dollar. They won’t be as inclined to waste money down the road once they know how much effort goes into saving up for a treasured item.
  • It can serve as a stepping stone to other financial products and services. By managing their funds in a savings account, kids can learn about interest and the difference between deposits and withdrawals. If their account comes with an ATM card, they’ll also learn how ATM transactions work, and what the consequences can be if they overdraw their account. All of these lessons will come in handy down the road when they open a checking account, or try out different savings vehicles like certificates of deposit (CDs), or Money Market accounts.

A children’s savings account can be a great way to lay the groundwork for sound financial habits. As for deciding where to open your child’s account, there are many options out there. You can go with an account specifically tailored to children, you can opt for an online-only account – which typically offer higher interest rates than traditional accounts – or you can open an account at your regular bank. Generally, you’ll want to look for an account that offers a competitive interest rate, and that doesn’t have a minimum balance requirement or monthly maintenance fee. And keep in mind that no matter what type of account you choose, any child under the age of 18 will need a parent or guardian listed on the account as well.