Tag Archives: Kids and Money

Kids and Money: Seven Tips

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As community bankers we frequently visit classrooms to talk about banking and money management.

For the little kids we focus on the difference between needs and wants and on the importance of saving money. For the teens we talk about more complex topics like how banks and credit works. We talk to them about what happens when you borrow money, why everyone needs a checking account and what credit scores mean.

We do this because we believe financial education is important and we are happy to provide this service to youngsters and young adults in our communities. However, we hope that parents will spend some time educating their kids about these topics as well. Here are seven tips to get you started.

Teach them about saving. Whether it’s a piggy bank, a clear glass jar or a passbook savings account, teach your kids to save money and to be excited about seeing it grow. Talk to them about how saving money means they’ll have funds for something they really want or need in the future.

Talk about the difference between needs and wants.   This is a lesson that a lot of adults could use as well. In talking to third graders with our Teach Kids To Save program, we find that they have an excellent grasp on what they need and what they want. They need a pair of shoes. They want the kind that light up when they walk. By the time they’re in high school, we find it’s often harder to get them to admit they don’t need the latest iPhone.

Talk about the cost of things. As you’re grocery shopping or making decisions about purchases, initiate a conversation about why you are buying the off brand canned goods or how buying in bulk saves money in the long run. Help them understand that even the small purchases call for decision making.

Give them a chance to earn money – Whether to give allowance or pay for chores is a personal decision each family must make. We will say that there is wisdom in providing kids with the opportunity to manage money they had to earn. Modest pay for chores or allowance gives them the chance to learn about responsible spending and saving. If you have teenagers, encourage them to take on a part time job or to do odd jobs in the neighborhood.

Help them open a Student Checking Account. They will need one eventually and learning to manage an account now will help them later in life. Click here to learn more about how Student Checking at VCNB works.

Discuss Debt. This is a good subject for everyone but especially for teens who have their eye on car ownership. Talk to them about things they might need to borrow money for – like a car, college education and house – and about saving money for a down payment. Also talk about how to manage a credit card responsibly and why they should avoid charging more than they can pay off in a month.

Talk savings. Teach them about the three most important kinds of savings for adults: personal, emergency and retirement. While retirement savings may not seem like a priority to a teenager, it will be important in a few years once they’re starting out in their career.

Your kids are going to learn about money from someone. Wouldn’t it be better coming from you?

Paying Allowance Can Pay Off, If You Do It Right

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Kids with piggy bank.jpegYour child wants to know why one friend gets $10 a week, another gets a whopping $50 — but he or she gets zero. Should you give in and pay your kid an allowance?

When it comes to helping your child learn the value of money, an allowance gets a thumbs-up from financial experts. “Kids have better money habits if they’re given a chance to make money choices,” says Roger Young, a senior financial planner with financial advisory firm T. Rowe Price. “One way to do that is to provide them with an allowance.”

  1. Rowe Price recently released its annual “Parents, Kids and Money” survey, in which  66% of parents reported giving their kids an allowance. But few moms and dads simply hand over cash without a requirement, such as doing chores or earning good grades. Most report that their children have to earn their allowance.

How much is enough?
According to the survey, more than half of parents who give an allowance give $10 or less per week. But there is a wide range — one out of every 10 parents gives more than $50.

If you decide to give an allowance and your child has friends who are getting more, be prepared for complaints and requests for more cash. If those arise, ask your child to focus on his or her own money goals, says Joe Santos, a financial advisor and Los Angeles-based regional executive for Merrill Edge, the Merrill Lynch online investing platform.

It might also be a good time, he says, to talk about the futility of trying to “keep up with the Joneses” — after all, the most important factor in deciding whether to offer an allowance is your own family budget, not someone else’s.

If you’re already giving your child an allowance but have room in your budget to meet a request for more, consider asking what would justify the raise, says Christopher Krell, a certified financial planner and principal at Virginia financial advisory firm Cassaday & Co. For example, the child could offer to take on more responsibilities in caring for a family pet.

How should an allowance be spent?
Krell suggests urging young children to earmark a third of their money for savings, a third for spending and a third for sharing or charity. “As kids grow into their teen years,” he says, “they can also learn how their savings accounts get a boost by calculating compound interest.”

“Share with your child that it’s not what they have,” Santos says, “it’s what they keep.”

But don’t expect children to always make smart spending decisions. They might blow through their allowance right away and later realize there’s something they really want to buy, but they’re out of cash, Santos says. It’s best if parents resist the urge to bail them out. “They can learn the consequences of spending all their money too quickly,” he says.

With an allowance, children can learn how to save and earn interest on their own money until they’re ready to make a desired purchase without incurring debt. That’s a good lesson at any age.

Teaching Kids Lifelong Money Lessons

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College Savings Pennies.jpg

We visit local elementary schools every spring for a project called “Teach Children To Save.” This is one of our favorite annual events because it gives us a chance to talk with youngsters and to help mold responsible financial citizens of the future.

It’s funny because these third graders have a pretty firm grasp on the difference between a need and a want as well as the importance of saving money. Inevitably several kids will raise their hands to tell us they are saving money for a car or college. Once we had a little boy tell us he’s saving for a wife “because they’re expensive.” We giggled but love the spirit behind his hard work.

On the other hand, we also talk with high school students and are surprised to learn how few are saving for anything. It’s a tough age, one where the expensive shoes are a necessity rather than a want and where there’s never enough money for all the socializing, gadgetry and new clothes they desire.  It’s hard to talk to older kids about saving money but it’s still something that parents need to do.

The best approach is to start when they’re young and to continue the dialogue as they grow. Even little kids have opportunity to earn money with chores or an allowance. Lots of times there are monetary gifts for holidays too. Begin by teaching them they can have fun with their money while saving a little too.

We once met a teen whose parents set her up with a savings system when she was a toddler:

10%        Tithing
10%        Retirement
10%        Car, college, house (in that order)
70%        Anything she wants

She’s an adult now who was able to buy her first car and contribute to her higher education. She continues with this savings system and has a better head start to retirement than a lot of older adults. She said her parents did not shelter her as a child but talked to her about some household expenses and why they save money.

One financial expert that we read suggested enlisting help from the grandparents. Instead of shopping for things, the grandparents send the kids each a check on their birthday. It’s for $100 plus their age. Everyone understands that it’s for saving, not spending and it has become a fun annual tradition that gives a big boost to the child’s savings account.

Another way to make savings fun for kids is to give them a short term goal for something like a coveted toy. Create a savings chart that helps them follow their progress. Achieving short term progress will encourage them to dig into long term goals as well.

Finally, remember they are still kids. Make them work for it to appreciate the value of a dollar through chores or an after school job. Consider incenting your kids by matching their savings. This will give them a boost while instilling an important life lesson.