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Parents have a lot of aspirations when choosing what lessons and skills they plan to teach their children. But if money management and other financial lessons aren’t near the top of that list, they should be.
Although children are too young to earn an income and pay their bills, childhood is a time when many financial skills and habits are learned — and this financial literacy can set your children up for more responsible money management as they transition into adults.
Even at a young age, parents can start instilling important lessons about how their children can think about their money and make responsible financial decisions. The following seven lessons will benefit your children not only now but throughout their life.
1. Small savings can add up.
When children are first learning the concept of money and financial literacy, long-term spending and saving is a strategy that requires teaching and practice.
From a piggy bank to a savings account, parents should look for opportunities to teach the value of saving — even in small amounts — and turning small amounts of money into larger sums that can be put toward bigger purchases.
2. An allowance is earned, not given.
Allowances are a great tool for teaching a number of different financial literacy skills for children of different ages. But when giving these allowances to children, make sure there are expectations that come with receiving an allowance rather than setting the expectation that children are entitled to money without any strings attached.
By tying allowances to household expectations and personal responsibility, you can help your kids associate income with hard work, which will, in turn, teach them the value of managing their money responsibly.
3. Allowances can offer training in managing a budget.
As children earn an allowance and discover the thrill of making purchases with their own money, parents can help their children learn the value of budgeting by teaching them how to be purposeful with their set budget.
From choosing how to divide up spending to saving for purchases larger than a single allowance payment, this fixed income can instill habits and skills that benefit your children well into adult life.
4. Spending needs to be prioritized.
Most children have eyes for purchases that are larger than their wallets. (And, to be honest, so do most adults.) As your child learns to work within a budget, you can help them understand how they want to prioritize their spending and work toward those goals through their savings.
These priority lists aren’t just a matter of choosing what they want the most. Children also need to understand the amount of time they’ll need to save for certain items and/or the purchases they’ll have to forego in exchange for making their preferred purchase.
While these decisions can be difficult, they’re very effective at helping children make thoughtful buying decisions.
5. Impulse purchases can be avoided.
When your child sees something they want in a store, help them work through the impulse element of making that purchase. One way to do this is by encouraging them to walk away; consider whether they really want to make that purchase; and then give them the option to return later that day, the next day or even later that week.
You can also place those impulse buys in context by reminding them of how the purchase will affect the other items on their wish list.
6. Delayed gratification can help you control spending.
From same-day shipping to charging purchases to credit cards, today’s consumer environment is geared toward fulfilling all of your needs immediately. For many consumers, this leads to increased spending — including spending on purchases they might not actually want or need.
Through budgeting, saving and planned purchasing, you can teach your children the benefits of delayed gratification, including the joy of waiting to receive the item you’ve long been anticipating.
7. Checking and savings accounts can help you manage and protect your money.
As your children grow up, you can help them open a youth savings account to get them acquainted with how to use a bank and its various services and tools.
When sponsored by a parent, a child can open savings accounts and learn how to deposit and withdraw funds, how to check their account balance online and how to grow their money through interest accrual.
By investing in financial lessons for your children at a young age, you can build up important decision-making skills that will benefit them as adults. Don’t settle for letting kids learn the hard way — take advantage of your opportunity as a parent to instill financial literacy and model responsible money management.
Take advantage of the financial education tools and resources available through your local credit union. Open a checking account today.
