Helpful Tips to Make Your Child Financially Savvy
Even as adults, making ends meet and saving up for something special can sometimes be a real struggle. Instilling financial awareness and responsibility is important at any age, but as your children become preteens and teens, they need to have a firm grasp on the importance of budgeting and saving. Using these tips will help your son or daughter have a better handle on the value of money and can help pave the way toward making your child financially savvy. Read more to learn about teaching kids personal finance.
Understanding Costs of the Real World
When teaching kids about money, try asking your children how much they think everyday items cost. Their answers may surprise you! More , how realistic or unrealistic their answers are will help you get a sense of how they view money.
Take breakfast as an example. Ask them if they know what costs were involved in making the meal, reminding them that it’s more than just the cereal or bacon and eggs. What about the juice or milk they drink? What about the bread they toasted, or the butter and jelly on the toast?
Having your own informal game of The Price Is Right can help your kids get a grasp of the cost of living—and eating!
On another occasion, you might want to go even further by reminding your kids about the gas it took to go to the grocery store. How much do they think the pots, pans, plates, and silverware cost? Don’t forget the cost of the power it took to cook the meal and run the dishwasher. It’s a lot to think about, but after these discussions, your children may start to get a clearer picture that it’s more than just a couple of twenty-cent eggs on their plate.
Create a Household Budget
Make the entire family part of the budgeting and spending process. To help teach kids how to budget, establish a set amount each month for things like groceries, clothing, gas, and entertainment, then make the kids stick to that budget.
Take your children grocery shopping with you, and show them how to do price comparisons. Older kids will get lots of practice turning math skills into life skills as they calculate the “each” price or the cost per pound and make the item choices.
Do the same with your budget for clothes. If your son’s monthly budget for clothes is $50 and he will need a winter coat, remind him a few months in advance that he will need to save up for that. He will learn to prioritize spending based on needs rather than wants. Being financially responsible for clothing may mean that, suddenly, that perfectly good winter jacket at the secondhand store for $50 looks just as good as the $200 brand -new one.
Teach the 3 S Program
Get your young kids in the habit of thinking carefully about how they use money by teaching them the 3 S program. Use three containers (drawers, shoeboxes, envelopes, etc.) and mark one “Save,” one “Share,” and one “Spend.” Every time your child receives money—birthday, allowance, wages—they must divide their earnings equally between the three drawers.
The money in the Spend container is theirs—they can spend it on anything they want, no questions asked.
Funds in the Share container are for spending only on other people, like when they need to buy a birthday present or other gift. This is also a wonderful way to teach them the importance of giving to others by supporting a favorite charity or other worthy cause.
Explain to your child that he or she is not allowed to spend the money in the Save container. When the container gets full, take your child to the bank to set up his or her own savings account and deposit the money. Depending upon your child’s age, you could discuss goal setting, short-term and long-term savings, earning interest, investing, and other related topics. Establishing a savings habit helps teach kids about money and gives them a sense of accomplishment when they achieve a financial goal.
Use Data as Currency
If you need a little extra help to make your kid a money genius, perhaps because your tweens or teens struggle a bit with the value of money, start by using something they really care about—the data plan for their mobile devices.
To begin teaching teens about money, set a limit for their data usage in a two-week period. Explain to them that this is similar to how a working adult gets a paycheck every two weeks and needs to keep living expenses within that amount. Your kids will need to start reviewing their usage or “data budget” regularly to make sure they don’t exceed their maximum.
Do not limit it to their screen time, but make sure they know that their usage does include their phone and app updates. Using the “data budget” for updates is no different than using money from a paycheck to pay for the maintenance on a car. With both money and data usage, it’s better to plan ahead by keeping some in reserve. If they run out of data, sit down and review their usage with them. Help them develop a plan to make it last longer in their next “pay period,” or better yet, how to use less than their budgeted amount and roll it over to the next two weeks.
At Connections Academy, we understand that teaching life skills is just as important as the fundamentals of reading, writing, and math. We hope these tips and examples will help make your kid a money genius—or at least become more financially savvy!
To learn how you can be more involved in your children’s education through online public school, visit the Connections Academy website. Or to learn about online private school, visit International Connections Academy’s website.