Waldo State Bank’s 5 Steps to Raising Financially Savvy Kids
With 41% of young adults receiving no formal financial education, 68% of young adults financially at risk or financially precarious, and over 50% reporting their parents having the most influence on their financial education, it’s important now more than ever for parents to take a leading role in financial literacy for their children. Not sure where to begin? Don’t worry, our financial experts at Waldo State Bank put together five steps to raising financially smart kids.
1. START YOUNG
According to a recent study by the University of Michigan, children as young as five already have “distinct emotional reactions to spending and saving money that translated into actual, real-life spending behaviors.” So, it’s important to start having conversations early with your kids about financial matters. Like learning many things, the younger you start, the easier it is for them to create a life-long habit of making smart financial choices.
2. TALK ABOUT MONEY OPENLY
Turn everyday activities into learning experiences for your child. If you’re going to the grocery store, talk about how much different items cost, and which ones will save money. If you are looking into investments or paying bills, talk about it with your kids around so they begin to learn the concepts and language of money. Don’t allow money to become taboo but have open conversations at an age-appropriate level so that they can learn from real-life examples the impact of finances on everyday life and decisions.
3. GIVE KIDS TOOLS TO LEARN
The best way to learn is to put into practice, so allow your children to make small financial decisions for themselves and learn the consequences of how they spend or save money.
If you have younger children, give your child three piggy banks, one for saving, one for spending, and one for giving. This method allows your child to learn the impact of budgeting by watching their money fall and rise as they spend, save, and give.
If you have older children, open a joint or custodial bank account and teach them how to manage their money through banking.
By empowering your child to take charge of their money, they will gain confidence in making financial decisions as they grow older and make more significant decisions.
4. ENCOURAGE KIDS TO WORK FOR THEIR ALLOWANCE
Teach them where money comes from by having them earn their allowance, rather than just giving it to them. Have your child do an extra chore, above normal expectations, to earn their allowance, so they equate money with work and appreciate its value.
5. LEAD BY EXAMPLE
If your child overhears your talking about putting unnecessary purchases that are above your budget on a credit card consistently, they will think that credit cards are an alternative to budgeting. Alternatively, they can learn positive financial decision making by hearing you talk about saving for big purchases or forgoing unnecessary purchases to keep to a budget.
Do you have a young adult who wants to learn more about managing their finances on their own? Check out our blog Tips for Saving as a Young Adult. If you want to learn more about family banking at Waldo State Bank, contact us today to speak with one of our financial experts! Start your hands-on learning with a free piggy bank and savings book when you open a custodial savings account!
