GRAND RAPIDS, Mich. (WOTV) - In recent years, when testing provided to teens, over 50% have been scoring as financially illiterate, not understanding the basics of good financial management tools. This doesn't mean we are bad parents, but it's not something that we always talk about with our kids. Like every other life skill, though, we should be doing so!
It can be fun, and actually helpful for everyone in the family, including the parents, to discuss financial topics. Like physical fitness, it takes time to build good habits, we're easily distracted and can make poor choices. By working together, we're more likely to stay focused and continue improving.
What kids need to know
- The importance of saving (short term and long term)
- Identifying the difference between needs and wants – and understanding there is a tradeoff.
- Developing a budget/spending plan.
- Using tools that aid in good financial management (example – debit card, checking account, mobile and text banking)
- Understanding how credit works
Younger than age 5
- Open a savings account in their name (at a credit union, of course! )
- Start an at home savings tool (piggy bank, savings jar) – visually see it grow and become heavier
- When full, transfer a portion into CU savings account
- Allow them to help pay for small items at the store (understanding transactions)
- At home play store (sell their items for various amounts of coins to teach about various values)
Kids Age 5-7
- If in favor of allowance, this is a good time to start (establish amount based on expectations – discuss guidelines such as reason for the allowance, how it should be used, and when "payday" will be each week)
- Let your child be responsible for their money – and if they spend it all at one moment, don't bail them out before the next payday (we all learn best by mistakes)
- Understanding the concept of shopping and getting the most for their money (example – waiting for sales, and generic brands versus name brand)
- Explain basics of budgeting (saving, sharing, spending) – allocating an amount for each category
Kids Ages 8-10
- As children mature, so does their interest in money increase (now maybe appropriate to begin explaining how adults earn money, contribute to our communities by paying taxes)
- Maybe allow ways that kids can earn additional money (additional chores around house, etc.)
- If comfortable, can introduce more into discussion (monthly family expenses for housing, food and transportation) – only if comfortable, show them your own budget
- 10% savings habit
- Show online banking together, and review statements
Kids Ages 11-14
- Needs begin to change (clothes, cell phones, etc.)
- Maybe reevaluate allowance amount and payment frequency (maybe every other week or even monthly rather than weekly) – longer pay periods help them learn about pacing their spending
- Basics of investing (visit sites like mint.com to learn)
Teens Ages 15-18
- Critical years, as adulthood is right around the corner!
- Open and honest dialogue about money (discuss rather than lecture)
- Encourage long term savings (car, college)
- Checking Account with a debit card – mobile and text banking easily understood (importance of keeping balanced)
- Discuss basics of credit and using credit cards (and even credit score)
- Valuable lessons learned with having a job (time management, responsibilities of clothing and transportation needs, workplace behavior, tax withholdings)
- Consider opening an IRA (when earning income from a job)
Resources Available to Parents
NEFE (National Endowment for Financial Education): www.nefe.corg
Jump Start Coalition: www.jumpstart.org
Biz Kids: www.bizkids.com
Feed the Pig: www.feedthepig.org
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