Teaching Kids About Money

Teaching your children financial competence and responsibility is critical to their futures. Good habits start early, and an understanding of the importance of saving money brings lifelong benefit. Kids are naturally interested in money. Engage your children using some of these simple and fun suggestions and help them learn the value of money:

·        Children learn by example and by doing. Taking the time to discuss how and why your family is saving emphasizes the importance of this positive, lifelong habit.

·        Teach your child the importance of personal saving. Help them set a realistic savings goal and encourage them to achieve it. Make their savings visible and real by having them place money in a piggy bank or clear jar. Then…

·        Help them open their own bank savings account and make regular deposits. Some banks have kids clubs and young members get newsletters in the mail or receive balloons or stickers when they make a deposit. Reward a savings deposit with a an ice cream cone or trip to the park. If you’re lucky enough to live in the Denver area, Young Americans Bank, 303-321-2265, offers real, hands-on savings accounts, checking accounts, and more to young people under 22 (bank-by-mail is available for kids living in other states and countries).

·        Talk to your child about the family budget. Reinforce the learning process by budgeting for a family outing or a purchase. Hold family meetings to talk about your family's expenses and ways to save. Involving your child gives them practical experience and allows them to be an active participant in the buying and saving process.

·        Show your children how an ATM machine works. While many children know that money doesn't grow on trees, they may think it comes out of a wall. Help your kids understand that you must put money in the bank before you can take it out. Remove the “wow factor” out of ATM’s.

·        Make sure that allowance is tied directly to the completion of established tasks. As allowance increases, responsibility should as well. If your child achieves a savings goal with allowance they have earned, consider an extra reward.

·        Start the process of explaining credit (especially credit cards) as early as you can. Emphasize that credit is not free money and that paying it back slowly is very expensive.

A System for Saving Money

Savvy saving can (and should) start at an early age. Best-selling author and American Bankers Association Family Finance Adviser Neale Godfrey recommends helping your child split up any money he or she earns, receives, or even finds. Show them how to divide their money using the "10% - 30% - 30% - 30%" system and put it in four separate, labeled containers between trips to the bank to make deposits. This makes savings visible and real. After all, everyone enjoys watching their money grow!

10%  Charity - Take 10% off the top to share with those less fortunate.

30%  Quick Cash - Use this 30% for instant gratification.

30%  Medium-Term Savings - Save this 30% for 1-6 months to purchase something special.

30%  Long-Term Savings - Use this 30% for important future goals, like college.