Many adults wish they knew more about the fundamentals of money management and making sound financial decisions at a younger age. Unfortunately, if children don’t learn this at home, they won’t learn it in school either. According to the Council for Economic Education, in 2022, only 23 states require students to take a class in personal finance to graduate from high school.1
The following are some tips for teaching kids about money:
- Start with an allowance – Giving children allowances is an excellent way to teach them how to save money and budget for things they want. One idea is to have a portion of the allowance tied to typical household chores and another for educational accomplishments. This gives the child the opportunity to “earn” more if they do more chores and perform well in school. You can even give “raises” if they manage their money well.
- Set up a savings account at the Bank – By opening a savings account at a ‘real’ bank, children can start earning interest and understand the concept of long-term saving. Encouraging them to save and invest a small portion of their allowance can lead to a lifetime habit of regular saving and investing, setting them up for a financially secure future.
- Encourage a summer job – Studies show that young people with jobs are more likely to be better savers in the long run. As they begin to earn their own money, it is appropriate to expect them to start paying for some of their own expenses, like gasoline and entertainment.
- Create a budget – Once kids accept their first job after college, help them create a budget that reflects their income and expenses. It is also important to have a system to track their spending. Budgets only work if we stick to them. Several free apps can assist with monitoring spending, such as Empower’s Personal Dashboard, Quicken Simplify, or Monarch Money, which recently replaced Mint.
- Introduce them to investing – When your kids are younger, consider opening a custodial brokerage account such as a UTMA or UGMA to help them purchase a few stocks. Then, set up regular meetings to review their performance. For older children who are starting their first jobs, review their employee benefits with them to make sure they take full advantage of matching contributions to employer-sponsored retirement accounts.
One of the greatest gifts we can give our children is teaching them good money habits from an early age. Capital Insight Partners is always happy to help. Contact us today if you could use assistance with your personal financial plan.
- Survey of the States 2022, 03/2022