Seven Tips for Raising Money-Smart Children
For most of your adult life, you've had to deal with spending, budgeting, and saving. Now comes the fun part: teaching your children how important it is to be smart with their money! Starting to teach these lessons at a young age will help your children build smart money habits that will stick with them for the rest of their lives. Here are seven tips that can help you teach your children the importance of budgeting and saving:
1. Start Early
Even when a child is very young, there are everyday moments you can take advantage of to teach them about money. For example, when you pay for something at a store, count out the money with your child or let them pay the cashier. Additionally, give them a piggy bank to begin learning about saving, or better yet, a clear jar so they can see the money growing. Eventually, let your children buy a toy they want with their savings!
2. Take a Trip to the Bank
Opening a savings account for your child and making regular deposits from birthday or holiday money, allowances and more can help teach them the importance of saving. Additionally, as the account balance grows, you can start discussing the concept of interest with your child. Discuss how the longer you keep your money in a savings account, and the more money you deposit, the more interest you will earn.
3. Set a Good Example
You are your child's first teacher, so always be on the lookout for lessons from your own experiences. Talk to them about the reasons you save, spending decisions, and why these things are so important. Also, don't be afraid to discuss money mistakes you've made in the past to help them avoid doing the same thing.
4. Introduce the Responsibility of Using a Card
There are so many options when it comes to starting your child off with their first card. Once they're in their teenage years, you can get them a debit card that is linked to a savings account or set up a prepaid card that can be loaded with funds. When they're really ready for the responsibility, you can help them set up a credit card. The key to a credit card is that they have enough money to pay off the full amount due on time each month. These are all steps that can serve as lessons in financial responsibility, budgeting, and managing a card of their own.
5. Create a Budget and Track Spending
Now that they're putting money into the bank, teach them the importance of budgeting what you have. You can introduce the envelope strategy, where you divide your expenses into budgeted categories and set aside designated envelopes of cash for each one. This will show kids exactly what their money is going toward and make it easier to track their own spending. Keeping money in the bank is also a good tactic for both saving and budgeting. Establish an understanding that it’s okay to spend some of the money they earn, but some of it is better off being put away for the future.
6. Go Paperless, Use a Banking App
There's an app for everything, even the bank! Burke & Herbert Bank has free Mobile Banking apps for iPhone®, iPad® and Android™ that make it easy to quickly check balances, view recent transactions, pay bills, transfer funds and of course, deposit checks right from your phone or tablet. This will let your child have their banking right in the palm of their hand (and means no more excuses for not being on top of their money situation!).
7. Keep the Conversation Going
Continue to talk about the importance of saving and budgeting as long as you can. As your children get older, they will have new financial responsibilities and with those will come new questions. You can eventually help them when it comes to taxes, credit reports, mortgages and thinking about retirement plans. The most important thing is that you start this conversation early so that your children establish smart money habits at an early age!