by Matthew Durkee, New England President, Community Bank
For many of us, one of our first memories is going to a store with our parents and seeing a toy that we just had to have. Oftentimes, our parents would tell us that “If we save our money” that someday we could buy the toy. Our parents then used that moment to tell help us understand how saving is an important part of obtaining our needs and wants. Yet many young adults have either not been taught how to save or, unfortunately, they learn by trial and error.
As with most phases of development, parents play an important role in teaching their children about money, including how to budget and spend wisely. What we learn as children can have a major impact on what we value as we get older. Talking about money with children can help provide a foundation which helps prepare them for the future. It’s never too late — or too soon — to brush up on your money smarts.
Consider these four financial tips for teaching children about money. These can help position them to make wise decisions when they move on to college, start living on their own or get their first job.
Open Conversations
Kids learn by watching what their parents say and do. As money topics arise, talk with them as openly as you feel comfortable. Introduce children to basic financial decisions and include them in financial conversations when appropriate. Parents should not feel anxious talking about money matters; instead, make it an honest and relaxed everyday conversation. It can be as simple as talking them through making a purchase at a grocery store and why you decide to purchase one item over another, or skip a purchase entirely because it is over your budget. Explaining your thought process to your children will give them insight into their own buying decisions. Walking them through which factors they should consider when making a purchase, large or small, helps them understand how to analyze the need for a purchase.
Goal Setting — Give, Fun, Save
Teach children the importance of managing money to reach a goal. Talk them through the process of how they can achieve their goal and how to obtain money. Perhaps they can save their birthday or holiday money, complete household jobs like setting the table or putting away the dishes to earn cash, or provide them with an allowance simply because they are part of a family system. When old enough, encourage children to get an age-appropriate job like tutoring a younger student, walking neighbor’s dogs or babysitting. This is a perfect time to introduce them to three money categories: money to give, money for fun and money to save.
From Piggy Bank to Bank Account
An old-fashioned piggy bank can be a great way to teach children about saving while giving them a fun and easy way to do it. A piggy bank is a visual way to educate kids on how to fill up their bank with change and dollars and reach their goals. Once the piggy bank is full, teach them how to count how much money they have. Then, when they’ve determined how much they’d like to put into savings, take your child to your local bank and establish a first savings account. The piggy bank illustration can provide a great source of motivation for children. They will understand that their money will grow over time as long as they don’t touch it.
Age-Appropriate Money Talk
While it is recommended that parents have open conversations about money with their children, it is equally as important to ensure the discussions are age appropriate. It is never too early to start teaching young children about money through playing store, counting and sorting change, but you want to ensure these conversations are calm and not a source of stress for young children. Teach them that financial health is part of life and is not something scary. When they do start to ask questions, take them seriously and answer them honestly and to the best of your ability.
As children get older and understand things a bit more, they may be ready for more in-depth money lessons. As they understand concepts more, you may try to weave in lessons that are more substantial by reinforcing good money habits and set the tone for their money decisions once they are in the “real world.” During high school or if they are gearing up for college, are ideal times to discuss bigger financial topics like debt, responsible spending, how to manage financial accounts and how to budget for expenses. The most important tip at this stage is to continue having open and honest conversations just as you have since your children were younger. Continue discussing your real-life money experiences with, and around, your teenager and make it a conversation. Share your financial plans, asking what they think, and being honest about mistakes you have made and goals you have for your family’s finances.
Lastly, I recall many times playing games with my children that helped them to understand the impact of saving and spending. While I did not appreciate the learning at the time, playing games like the Game of Life, Monopoly Junior and Pay Day certainly helped my kids understand a little about money. While playing these games, we had open and honest conversations and shared experiences how money works. Investing in your child’s financial awareness and education is the best investment, ensuring they are set up for the future financial opportunities.
Matthew Durkee is the New England regional president and leads Community Bank’s team. A native Vermonter, he has been active in the local banking community for his entire 30+-year career.