When we think of back to school, we think of what our kids will learn to set themselves up for success as adults.
Among these is understanding finances and saving money. As parents decide when to start teaching kids about money, sooner is better than later.
Kids can learn a lot watching their parents. What they see can set a pattern for life. The key is to not run away from the conversation, but look at it as an opportunity to set our kids up for success.
You might feel comfortable talking to kids about their favorite video game, fashion, or trending Tik Tok video, but maybe not about money. As everyone is looking forward to new beginnings after the pandemic, “back to school time’ is a great time for the whole family to establish new habits and that includes the younger ones at home.
What lessons can we learn from months of isolation and financial turmoil? What have we learned and what do we want to pass on to be ready for another major crisis, if it comes?
Some parents may need help passing on a financial literacy mindset to their children. However, once you decide to have the conversation, it’s important to start as soon as possible. Money is a tool that is very powerful, when mixed with the right knowledge.
1. Start Talking About Money Early
Experts say children as young as five or six can understand the basics of money and saving. With that in mind, we can start sharing financial literacy skills early to ensure our children are set up for success.
As grown-ups, we know money is important to buy groceries, keep a roof over our heads, buy things we want, and much more. Even before they are in first grade, children can understand what money is and how to use and save it. Be proactive talking about money and modeling good spending behavior yourself.
The conversations may vary depending on your child’s age, but the general idea is the same – teach them early and often about money and finances. This will help them become comfortable talking about money and find solutions instead of having a financial misstep and ignoring it.
2. Learn the Importance of Saving Money
Learning how to save is just as important as learning what to spend money on. As their savings grow, parents can reinforce the good money management habits they are putting into practice. Having financial reserves can protect against hardship and give the saver power to decide how to spend or invest the money. Being financially literate is important at any age, but especially for young people just starting on their financial education journey.
3. Talk About Wants Vs. Needs
It is always important to make every dollar count. Part of the money education for children is helping them understand the difference between things they want and things they need.
That differentiation can be challenging for adults too. Financial literacy means understanding the difference between a “nice to have” (a want) and something they cannot live without (a need).
Sometimes a family challenge may move the “wants” to the back burner temporarily, while the “needs” become more important. If a challenging financial situation requires the family to adjust their lifestyle, make sure kids understand what is going on and why. This is a great opportunity to teach the importance of planning, budgeting and the fact that it’s ok to wait.
4. Create A Budget Together
Next time when you create a budget for the household, include your kids. Include them as you talk about how, where, and why you spend your money. Start small and slow, be honest, be patient, and encourage questions. Remember to talk in a way that doesn’t upset them or make them worry about finances.
5. Help Kids Understand Where You Are Financially
Being honest about your current situation can be a great opportunity to educate young people about money and how to handle it. A great start is getting a free financial health assessment and then, involve them as you work through the financial process for the entire family.
6. Incorporate Money Into Daily Activities
One way to increase your child’s financial I.Q. is to incorporate learning into everyday activities. Here are some tips:
- Play games involving money
- Help kids make a wish list for things they want
- Teach while you shop
- Link their allowance to chores around the house
- Teach them to split money into categories like saving, spending, and giving
- Have them “save up” for something they want
Wrapping It Up
Back to school is a good time for new beginnings.
It’s important to remember money plays an essential role in all of our lives.
This blog post was brought to you by GreenPath Financial Wellness.