Friday, Sept. 20, 2019 | 2 a.m.
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Money management skills are some of the most powerful lessons parents can teach, and children will benefit from those lessons for the rest of their lives. “It’s never too late or too early to teach your children how to manage money,” said Nicole Cypers, VP of Public Relations for America First Credit Union. “We make education a priority because knowing how to make smart financial choices is essential, no matter if our member is 5 or 95. America First offers a wide range of engaging financial literacy programs with content tailored to different age groups.” Though learning is a continual process and there’s no single lesson that can prepare children for a lifetime of financial responsibility, giving them tools is an important building block for their future.
Financial education may begin sooner than some parents think. “Children are always paying attention whether we realize it or not,” Cypers said. “They’ll probably notice how you treat money -— as well as your general attitude about finances — before you’re aware that they’re already learning from your actions.” Be sure the habits you’re exhibiting are positive.
Teaching through play is a great way to demonstrate financial transactions. Create a make-believe store at home and exchange pretend money. Show children how to count money, compare prices and determine what they can afford. Ensuring it’s an enjoyable activity can help cement understanding.
Tip: Using real money is a way to familiarize children with the financial process. When making small purchases at the store, count cash with your child and let them hand it to the cashier. When “practicing” with money, demonstrate opportunity cost — if they choose to purchase one thing, there may not be enough money remaining to purchase something else. This will help introduce them to budgeting.
Older children and teens
An allowance is an opportunity to teach children about money while rewarding them for their work ethic. “We recommend that parents sit down with their kids and negotiate what an appropriate allowance should be based on chores and duties around the house,” Cypers said. “For instance, offer $1 for doing the dishes or $3 for cleaning their bedroom. Be open if your child proposes a counteroffer and ask them to explain their reasoning. This will help them develop a sense of value around work and income.”
Once an allowance is settled, help your child budget their money. Tally how much they earn each week, how much they need for expenses and determine long- and short-term savings goals.
Opening a savings account is another practical and necessary teaching opportunity. “We offer youth savings accounts that are ideal for those who are new to managing their finances because they feature no annual fees and no minimum deposit levels,” Cypers said. “By consistently contributing to savings accounts, young people can see how their money adds up and appreciates with time.”
Tip: Consider matching your child’s savings up to a certain amount to teach them about 401(k) contributions and compound dividends. This introduces them to a real-world situation and motivates them to save.
Lead by example
Seeing how parents navigate financial situations is not only how children learn responsible spending, it’s often one of the most valuable teaching techniques. Lessons can include using cash vs. credit or applying for and securing loans. Details aside, your child’s relationship with money is likely to mirror your own. “It’s beneficial for parents to prioritize ongoing financial education as well. We offer educational resources because we want our members to have a firm understanding of financial health, which is something they can pass on to their children,” Cypers said.
Tip: To introduce the concept of credit to your child, lend them money for bigger purchases and outline credit limits for the loan, including interest. Hold them to the loan agreement until the full amount is repaid.
Encourage charitable giving
Money is more than just purchasing power, and encouraging your children to give to charitable organizations is a way to demonstrate that. In addition to financial giving, spend time volunteering. This allows children to see why philanthropy is important and how much their giving can affect others.