How to Raise
a Financially Savvy Child
If you have
children (or grandchildren) you have an opportunity to give them a jump-start
on their journey to becoming financially responsible adults. While teaching
your child about money and finances is easier when you start early, it's never
too late to impart your wisdom. Here are some age-relevant suggestions to help
develop a financially savvy young adult:- Preschool – Start by using
bills and coins to teach them what the value of each is worth. Even if you
don't get into the exact values, explain that a quarter is worth more than
a dime and a dollar is worth more than a quarter. From there, explain that
buying things at the store comes down to a choice based on how much money
you have (you can't buy every toy you see!). Also, get them a piggy bank
to start saving coins and small bills.
- Grade school – Consider starting
an allowance and developing a simple spending plan. Teach them how to read
price tags and do comparison-shopping. Open a savings account to replace
the piggy bank and teach them about interest and the importance of regular
saving. Have them participate in family financial discussions about major
purchases, vacations and other simple money decisions.
- Middle school – Start connecting
work with earning money. Start simple with babysitting, mowing lawns or
walking dogs. Open a checking account and transition the simple spending
plan into a budget to save funds to make larger purchases. If you have not
already done so, it is a good time to introduce the importance of donating
money to church or charity.
- High school – Explain the job
application and interview process. Work with them to get a part-time job
to start building work experience. Add additional expense responsibility
by transferring direct responsibility for things like gas, lunches and
expenses for going out with friends. Introduce investing by explaining
stocks, mutual funds, CDs and IRAs. Talk about financial mistakes and how
to deal with them when they happen - try to use some of your real-life
examples. If college is the goal after high school, include them in the
financial planning decisions.
- College – Teach them about
borrowing money and all its future implications. Explain how credit cards
can be a good companion to a budget, but warn of the dangers of
mismanagement or not paying the bill in full each month. Discuss the
importance of their credit score and how it affects future plans like
buying a house. Talk about retirement savings and the importance of
building their retirement account.
