Peach State is dedicated to educating our members about their finances. This guest blog from Nerd Wallet provides several tips for teaching children money-managing skills.
There is a crucial subject that may be given short shrift in the classroom: personal finance.
While 19 states, including Georgia, require instruction in the topic, according to the Council for Economic Education, your children can use all the help they can get when it comes to learning about managing and saving money. Consider these age-specific lessons and tools to steer the youngsters toward a sensible financial life:
Preschool to 6th grade
Sesame Street’s For Me, for You, for Later kit is a great free resource to share with children from nursery-school age to early elementary years. It features a video where Elmo the Muppet learns the basics of dealing with money by using labeled jars: one for spending, one for saving and one for donations.
Around age 6 – or when children start asking for more money – consider providing a regular allowance to reinforce the skills your kids are learning. Make a savings poster and use star stickers to reward smart money choices.
By middle school, a youngster should have a savings account set up and should start considering long-term financial goals, like saving for college. Help children understand how compound interest works, letting what they save earn more money for them later on, so the more they set aside now, the better off they’ll be.
Help your children understand how to draw up a budget and stick to it by tracking income and expenses. Build on the jar activity by encouraging them to divvy up what money they receive, reserving 30% for spending, and setting aside 30% each for long- and short-term savings, and earmarking 10% for giving. If they’re fortunate enough to have smartphones, take a look at free budget apps from software makers such as Level Money, Intuit (Mint) or BillGuard that can make routine chores interesting and even fun.
In high school and beyond, teens may need help finding a balance between spending and saving. One way to accomplish this is to make sure they use checking and savings accounts and that they know how to manage a debit card. They’ll get a sense of financial responsibility and may become more confident in their money skills.
One option to help your teen learn to manage a budget is to load allowance money into a debit account and let the child use it to buy necessities such as food, gas and clothes. This can help teach them to prioritize spending and the value of saving. For example, setting aside enough for lunch and gas, plus a certain amount for a long-term goal, before heading out to get some new shoes.
If your teen is moving away to attend college, consider charging her “rent” for the last few months at home, so she has to budget accordingly. Doing this can help her get used to coping with financial demands such as rent, utilities, food, and gas bills. By putting what she pays you into a savings account, you can provide her with a safety cushion when she’s off on her own and she’ll get some invaluable money-management practice in the bargain.
If your teen has a summer job, encourage him to set up a more sophisticated savings account such as a Roth individual retirement arrangement (IRA) to give him a big head start on preparing for later years. Make sure he understands the money in an IRA can also have other uses, to help pay for a home, tuition and medical bills, for instance.
Seek out help
We all know that sometimes a lesson sinks in better when it comes from someone other than a parent. Capitalize on the online and printed resources available through your financial services provider or ask one of the professionals there to meet with your child to discuss good money-management practices.
Cait Klein, NerdWallet