Category: teaching teens

Posted in Financial freedom, money management, Parenting, teaching teens

Teaching kids about money: should parents or teachers take responsibility?

Posted on by Tim Connolly

For most us, our relationship started with the humble piggy bank.

Into the ceramic swine went our pocket money and, occasionally, we were allowed to take it out for a new toy. That’s how we learned to save.

But what’s the point of a piggy bank when there’s no coins or notes to put in it?

Joanne McGee is a mum of two girls, Megan, aged six, and Tilly, aged four, and is just starting to teaching kids about money.

“The value of money needs to be taught a bit more about, I think, but that’s quite hard, especially as today we don’t see much physical money.

My girls see me shopping but I’m just handing over my card, or on the internet clicking on a button.”

She isn’t alone: 2017 saw card payments overtake cash – but at least most parents understand how a debit card works.

Brooklyn Andrew (pictured) is a mum of three and assistant secretary for her local branch of Foresters Friendly Society.

Her oldest child, Keane (pictured right), aged 8, recently started playing cult online game Fortnite, where players use a virtual currency, V-Bucks to buy virtual weapons and outfits.

The problem is, you buy V-Bucks using real money.

“To buy them he’s using my card and I found it quite a struggle to explain to him the difference between that and having the money in bank accounts and physical money”, says Brooklyn.

“I wouldn’t have a clue what to teach them because it’s not something I do myself.”

A gap in the classroom

With money changing so rapidly these days, it’s understandable that mum and dad don’t always have the answers.

The problem is, neither do school teachers.

A study by financial advisers OneFamily found that more than one in three parents struggled to discuss money with their children.

55% of secondary school teachers also believe there is not enough focus on preparing teens to manage their own finances.

Yet a similar proportion, 50%, rated their own school’s Personal, Social, Health and Economic (PSHE) education as satisfactory or poor.

A fifth of teachers surveyed said they only did the minimum required to tick a box, whilst 41% said the resources available to teach teens about personal finance were out of date.

Teachers said they were already observing the repercussions of limited financial education.

Many of their teenage students had unrealistic expectations of what they’d earn (observed by 45% of teachers), didn’t know the difference between a credit and debit card (38%) and some didn’t even know where money comes from (16%), according to OneFamily’s study.

Counting money vs. understanding money

So, what are children being taught about money in schools?

Personal finance is covered by three subjects: maths, citizenship and PSHE.

Citizenship is intended to deliver practical information: for example, children in Key Stage 4 (aged 14-16) learn about “income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent.”

PSHE takes an even-more ‘real-world’ look at personal finance.

As the PSHE Association of teachers explains, “mathematics lessons can teach pupils to calculate interest rates but in PSHE lessons pupils develop and use critical thinking and risk assessment skills to evaluate whether, for example, having a card with sufficient credit to pay for something is the same as actually being able to afford it.”

It’s not clear, however, whether most children follow the citizenship or PSHE curriculums to the letter.

Schools are not legally required to teach the personal finance parts of PSHE, despite the Commons Education Committee calling for PSHE education to be statutory back in 2015.

Although citizenship education is mandatory to age 16, just 1% of pupils took the GCSE in citizenship in 2018.

With schools’ budgets being cut by 8% since 2010, and pressure to prioritise exams and grades, the sorry state of money teaching is understandable, but children are the ones losing out.

Should parents do more?

To make up the gap between teaching and reality, five in six teachers say that parents should do more.

Parents aren’t necessarily opposed: mother-of-two McGee says responsibility for teaching money should be divided equally, whilst Andrew says parents should take the lead: “you’re spending more time with them; it’s you taking them out shopping; it’s you who they see day-in-day-out, when you have to work budgets out and things like that”

The PSHE Association also advises that “ideally many of the topics covered in PSHE are a partnership between parents and schools. It’s not always guaranteed though, which is why schools should cover it as standard.”

Parents shouldn’t be put off teaching their children about money, says Steve Ferrari, managing director of child trust funds at OneFamily.

“Official guidance recommends that parents start teaching their children about money when they are a toddler and it doesn’t have to be taxing or complicated.”

Ferrari recommends that you start giving pocket money at age 6-7 to show them the benefit of saving.

If you need help with pocket money take a look at this article by love MONEY journalist Felicity Hannah, herself a mum, who asked a panel of financial experts for their pocket money tips.

When children are a bit older, it’s time to consider getting them their own bank account.

Many high street banks offer accounts, cash cards and debit cards to those aged 11 or above. There’s also a range of budgeting apps aimed at young people.

If you want to save for your child for the long term, you should consider a Junior ISA, which they’ll only get access to once they’re 18.

Growing up quicker than ever

Parents have always worried about their children squandering money, but the next few years could be particularly risky.

September next year will see thousands of teenagers born in 2002 receive access to their Child Trust Funds.

Launched by the New Labour Government, and discontinued in 2011, these were worth £250 (or £500 for low-income families) and many have since grown in size after being invested.

Where the money goes, criminals follow.

The Financial Conduct Authority has already warned that under 25s are six times more likely to trust an investment offer made via social media than over 55s, the group usually targeted by scams.

In some cases, Instagram ‘influencers’ impress young people with images of cars and jewellery, whilst persuading them to invest in highly risky investments such as cryptocurrencies.

Parents need schools to go beyond teaching children to add-up coins and address these all-too-modern threats. But with PSHE education still not mandatory, many children will miss out.

Teaching money at school has one final advantage, of which older generations are acutely aware.

A few well-spent hours in a classroom could reduce the need for a lifetime of learning through mistakes, sometimes at great expense.

As McGee reflects “I would have liked to have learnt about interest rates and mortgages…because that’s what real life is about really”.

Posted in Financial freedom, money management, Parenting, teaching teens

Creative Ways to Teach Kids About Money

Posted on by Tim Connolly

You can use toys like a toy cash register to teach your child a valuable lesson. For instance, learning how good it feels to give and what a positive impact it can have on other people’s lives is a great lesson for little ones. As is the fact that if they save money rather than spending it now they might miss out on some of the instant gratifications but they end up getting something much better in the end. You could even focus on financial education for kids by adding to their savings jar, perhaps every time they don’t dip into it for a month.

Let them choose how they split the money as this is part of the lesson. This is a great way to learn about money management and can start at any age.

Introduce money when they play

Adding a toy till to your toy box can be a great way to get little kids thinking about the concept of money, you can have conversations about how much things cost, and they will also be learning maths at the same time.

You can also play a money matching game to help them learn to recognise the different denominations of notes and coins. Little ones don’t understand to begin with that they need 100 pennies to get a single pound coin but it’s a good lesson for them to learn.

You can also get them to use real money either at home to “buy” their treats, or when you are out shopping. Give them a list in the supermarket and get them to see how little they can spend while still having everything on the list.

Talk about money in front of your kids

Ok, this isn’t exactly creative but there are many many people who don’t talk about money in front of their children. Kids learn by seeing us modelling behaviour, good or bad, so let them see you pay the bills, and bring them in on conversations about money. It’s good for them to understand that if money is spent on one thing it won’t be there to spend on something else.

Just be aware of your own relationship with money and work on it if you need to. You don’t want to pass on negative feelings about money or bad habits to your kids.

Posted in Discipline in kids, Financial freedom, Kids, money management, teaching teens

Are You Financially Literate? – Tips & Resources to Boost Your Money Smarts

Posted on by Tim Connolly

Financial education for kids and for everyone is a big deal. In the United States, it’s among roughly 60 official month-long observances declared by presidential proclamation.

Just as February is Black History Month, May is Mental Health Awareness Month, and November is National Entrepreneurship Month, April is National Financial Literacy Month. In the wake of the global financial crisis of the late 2000s, and following years of unofficial observation and multiple state-level declarations, President Barack Obama formally recognized April as Financial Literacy Month in 2011.

Why did the federal government feel the need to devote 30 whole days to financial literacy programming? For starters, because financial illiteracy is expensive. In a 2019 study by the National Financial Educators Council, the self-reported cost of deficient personal finance knowledge in 2018 was $1,230 per respondent. That’s about 2% of the 2017 median household income.

If you feel like an incomplete understanding of basic personal finance concepts cost you last year, you’re clearly not alone. But financial literacy isn’t rocket science. With effort, you can overcome whatever knowledge gaps you face today and cease leaving money on the table. Start here.

What Is Financial Literacy?

“Financial literacy” describes the knowledge and skills necessary to effectively manage your personal finances and achieve complete financial self-sufficiency.

Financially literate consumers are equipped to make informed financial decisions about a host of money-related matters, such as:

  • Banking
  • Near-term budgeting
  • Using and managing credit and debt
  • Avoiding financial scams and exploitation
  • Setting and saving for financial goals
  • Long-term financial planning
  • Investing
  • Estate planning

Like language literacy, where your reading grade level quantifies your competency, financial literacy is gradated. Novices have little to no understanding of even the most basic financial concepts. Intermediates grasp the basics of spending and saving but may struggle with more abstract or longer-term concepts. Experts have the knowledge and confidence to manage all aspects of their financial lives and equip others – kids, parents, domestic partners, friends, employees – to do the same.

How to Increase Your Financial Literacy

No one is born with expert-level financial literacy, and no one achieves it overnight. But that’s not to say that becoming financially self-sufficient requires years of intensive study – far from it. Here’s what you can do, right now, to begin or advance your own personal finance journey.

1. Know Yourself

The first step on your journey toward financial literacy is self-knowledge.

Yes, as your financial and personal circumstances change, so will your principles, objectives, and priorities. But that shouldn’t deter you from establishing a frame of reference in the here and now. Among other things, consider:

  • Your Time Horizon. What stage of life are you in? Younger consumers’ priorities naturally differ from older consumers’.
  • Personal Values. Consider any deeply held beliefs or values that may affect your financial behaviors. Some consumers aim to avoid debt at all costs, for instance. Others orient financial decisions around environmentalism, precluding luxuries like car ownership.
  • Goals and Objectives. What are you spending and saving for? Where do you want to be in five, 10, 20 years?
  • Risk Tolerance. Use a risk tolerance assessment to inform your investing decisions beforeyou begin putting your money to work. The University of Missouri’s risk tolerance questionnaire is one of many examples.
  • Credit Profile. Even if you suspect you don’t have much of a credit history, find out for sure. Go to AnnualCreditReport.com to claim the free credit reports you’re entitled to by law, then use a free service such as Credit Karma to periodically check your credit score and learn how to improve it.

This is just the start. As your financial literacy improves, you’ll gain more insight into who you are as a consumer, planner, and investor.

2. Always Consider the Source of Financial Information & Advice

Financial literacy requires voracious information consumption. Alas, not all financial information and advice is equally valuable. Alwaysconsider the source of anyfinancial information you consume, including information published on personal finance blogs like Money Crashers. Yes, we strive to be unbiased and informative, but our content is written by a diverse roster of authors with diverse credentials, whose writing is informed by a combination of in-depth research and personal experience. Always consider information in light of its applicability to your situation and goals. The same goes for any personal finance website, publication, or podcast, no matter how authoritative it purports to be.

Be particularly wary of financial content from profit-driven financial companies, such as banks, investment firms, and credit repair agencies. For profit-driven organizations, publishing unbiased advice is secondary to selling their core products and services. They’re in thecontent marketing business, meaning their content is valuable to them only insofar as it increases their credibility in the marketplace.

Also be wary of what’s often referred to as the “financial entertainment complex.” Cutthroat competition drives financial entertainment outlets like CNBC and Motley Fool to promote controversial, contrarian ideas at the expense of sounder – if less sensational – viewpoints. Despite obligatory disclaimers, financial entertainment outlets may present as mainstream investing recommendations that aren’t suitable for most readers or viewers, with potentially adverse consequences for those who take them as gospel.

At Money Crashers, we put the fundamentals of financial fitness before all else and take a balanced, comprehensive approach to describing personal finance concepts and strategies. By contrast, sourcing information only from financial entertainment platforms – watching CNBC all day, for instance – is a sure way to distort your financial worldview.

When in doubt, turn to neutral, reputable sources, especially official government agencies such as the Consumer Financial Protection Bureau and Securities and Exchange Commission, and nonprofit research universities.

3. Seek a Range of Opinions & Advice

Always seek an assortment of opinions and advice about money matters. You wouldn’t opt to undergo major surgery on the recommendation of the first doctor in the phone book; why would you make a potentially life-changing financial decision on the basis of a single article or video?

By exposing yourself to a range of financial philosophies over time, you’ll gain the perspective necessary to sort valuable information and advice from bunk and the confidence necessary to articulate your own financial philosophy.

4. Master the Fundamentals

Turn to unbiased resources, including Money Crashers, to learn about foundational concepts such as compound interest, bank account types, account fees, deposit insurance, investment diversification, and the time value of money. The distinction between checking and savings accounts isn’t the most gripping topic, but every banking customer needs to understand it to avoid, say, excess withdrawal penalties for exceeding the six-withdrawal-per-month limit to which all U.S. savings accounts are bound.

5. Take Classes or Courses

Look for free or cheap personal finance classes and courses that you can take in your spare time. Brigham Young University, a private higher education institution based in Utah, has a pretty robust – and free – online personal finance education vertical, for instance. Indiana-based Purdue University has a retirement-focused course applicable to a range of financial situations. If you prefer in-person instruction, your local community college or library might have free or cheap evening or weekend classes.

6. Use Free or Low-Cost Money & Credit Management Tools

In addition to Credit Karma, Credit Sesame is another great free credit monitoring resource. As long as you can tolerate periodic offers for paid products and services from their partners, there’s really no reason notto opt into a free credit monitoring service.

It’s also wise to use a free or low-cost personal budgeting app, particularly if you’ve had trouble sticking to your budget in the past or you haven’t ever had a real budget. Mint is a popular, user-friendly option that doesn’t cost anything out of pocket; NeoBudget is a no-frills digital take on the cash-based envelope budgeting method; You Need a Budget claims its bells and whistles save the average user $6,000 per year; and if you love Google Sheets you can do your budgeting through Tiller.

Finally, consider an automated savings app – again, particularly if you’ve had trouble maintaining a steady savings rate in the past or saving at all. This space is crowded too; start by checking out Chime, which – unlike some automated savings solutions – has no monthly maintenance fees or hidden fees. Acorns is another to consider. When they round up your purchases, the difference is invested into an investment portfolio that you set up based on your risk tolerance.

7. Don’t Try to Walk Before You Can Crawl

Never overestimate your financial literacy. If you’re struggling to understand a particular financial product or behavior and can’t find easy, unbiased answers, steer clear until you feel more comfortable. For example, don’t open a margin account and start day trading before you understand how equity markets work; that’s a recipe for financial disaster. Instead, you can use a robo-advisor like Betterment, and they will handle most of the work for you.

8. Don’t Be Afraid to Ask for Help

Rather than overestimate your financial literacy, seek guidance from people and organizations that know more than you.

Use the Financial Planning Association’s free planner search tool to find Certified Financial Planners aligned with your goals and set up no-obligation consultations with each, even if you’re not yet ready to make a plan or hire an investment advisor.

If you’re struggling to pay down debt, use the U.S. Department of Justice’s list of approved credit counseling agencies by state to find reputable providers in your area.

If you’re preparing to buy a house or want to know what the process entails, look for a HUD-approved housing counseling organization and enroll in a class.

Just remember: Don’t take the word of any one person or organization as gospel. As in investing, the key to success in building financial literacy is diversification.

Posted in money management, Parenting, teaching teens

8 Financial Tips for College Students to Save and Manage Money Better

Posted on by Tim Connolly

If your child is one of the millions of college freshmen headed off to school, your August might be packed with shopping, gathering textbooks, and packing up entire rooms. And while picking out the perfect dorm decor might seem important, don’t neglect the deeper subjects.

Now is the time to talk to your child about personal finance. As a parent, you have the opportunity and obligation to prep your freshman on budgeting and smart spending strategies before he or she hits campus.

While college students might roll their eyes at the idea of making a budget, you being a parent should focus on financial education for kids that is vital to the college experience. Whether your child is paying his or her own way, receiving your help, using financial aid, or a little of all three, college is an expensive experience that becomes pricier with poor spending practices. By passing on a few words of wisdom, you can give your freshman the tools he or she needs to start college on the right financial foot.

Personal Finance Tips for College

1. Create a Budget

Carefree high school students frequently spend whatever is in their bank account, living off their parents’ generosity or the spoils of a part-time job. Once that student moves away to college, a budget becomes crucial.

Whether or not your child has been exposed to a budget, it’s important that you sit down together to look at finances. Map out his or her various streams of income, including money you’ll provide, income from a job, and money coming from student loans, grants, and other types of financial aid. Then, show your college freshman how to categorize expenses so he or she knows where it’s all going. While you can’t force your student to stick to a budget, you can feel confident he or she knows how to use one and has a clear picture of what is and isn’t affordable.

As stated, the trick with any budget is sticking to it. Once you and your child have gone over the budget, take some time to talk about how to make smart money choices that fall within the budget. For instance, help him or her navigate free or low-cost social activities, such as outdoor concerts, city-sponsored events, or school-sponsored adventure trips. You know your child better than anyone, so if he or she loves spending money on cappuccinos or the latest designer clothes, take some time to talk about buying clothes from discount retailers or brewing joe at home. Encourage him or her to track recurring expenses in a paper planner or digital calendar app to determine which makes more sense for your child.

While it’s tempting take over your child’s finances, let him or her lead – after all, it’s time for your college student to manage a budget. You can check in to make sure that he or she is on track, but let your freshman remain in charge.

Personal Finance Tips

2. Use Online Services

College students aren’t likely to sit down and go over finances in an Excel spreadsheet – especially when there are better options available. Instead, set your student up with an online service or smartphone app that makes money management easy and convenient. After all, that smartphone is practically glued to his or her hand anyway.

Some apps, such as Mint, make money management easier for a busy or forgetful college student. Mint enables users to upload bank account and expense information so he or she can manage all of his or her accounts in one place. The app makes budgeting a little more accessible for a college coed who is busy and on-the-go. This ensures fewer missed payments and penalties, as well as easy access to account balances.

In addition to money management apps, make sure you also take the time to set your student up with online banking services so he or she can transfer money online or use mobile deposit.

3. Minimize Student Debt

There are several ways to minimize student debt. Make sure you cover all the bases before sending your freshman off to school.

  • Spend on the Right Things. Naturally, college students shouldn’t use financial aid to fund pizza night in their dorm rooms, but temptation is a powerful thing. Take the time to impress the importance of using debt wisely. Even if loans look like “free money” now, they do come back to bite you. It’s your job as a parent to define what is and isn’t okay for your child to use loan money for. Tuition, books, housing, and maybe food plans – not social outings, new clothes, or pitching in for a party keg.
  • Borrow Only What’s Required. Not every student heads off to school with a fully-funded college trust. If your child needs to take out student loans, remind him or her that the amount borrowed should be commensurate with the type of salary available once a degree is obtained. Even if your student does choose to borrow money for school, it should be for school. Taking out more cash to fund an extravagant campus lifestyle might seem important now, but could be a serious problem later. Freshmen should start a pattern of living frugally now so that they’re not paying interest on things like a bigger dorm room or fraternity fees later.
  • Fund Extras with a Job. If your coed wants to fund a social life, it should be done with a part-time job, rather than student loans. Work-study positions usually offer the flexibility a student needs with the convenience of location, while off-campus positions frequently pay more. Either way, teach your child to have a “pay now” policy for nonessential purchases so that he or she doesn’t really pay for them later.
  • Funnel Extra Earnings to Loan Payments. Try to add extra loan payments into your child’s budget by using funds from a part-time job or from monetary gifts to help pay down student debt. While loans technically aren’t due until after graduation, paying them off while in school can help your student save serious money when it comes to long-term interest.

4. Look for Student Discounts

College students should become masters at exploring the ways their educational status can save them money. Vendors, local venues, restaurants, and services near college campuses often offer student discounts that could save your freshman big money during the first year. What’s more, by looking for discounts, students learn the value of hunting down great deals.

5. Take Care With Credit Cards

If going to college is like setting sail in a vast ocean, then credit card companies are the sharks. They specifically prey on new and inexperienced freshmen, banking on the notion that freshmen are strapped for cash and excited about the prospect of “easy” money. They also expect freshmen to be careless with credit cards, racking up late fees and high interest payments. Credit card companies often lure students in with college-centric offers, such as the promise of free concert tickets or free college swag.

Make a rule with your freshman: If he or she wants a credit card, the two of you can choose the best one together. Freshmen should never sign up for a student credit card on a whim. Instead, you can talk about the pros and cons of different cards, set a reasonably low spending limit, and look for cards with points or cash back rewards.

Your child may also want to use a debit card while in college. While it sounds foolproof, make sure your student’s bank doesn’t allow a large overdraft. In fact, turn off overdraft protection so your student can only spend what he or she has in the bank and won’t get slammed with overdraft fees. You can prep your child by setting him or her up with a prepaid debit card at home – he or she will soon learn that when the money is gone, it’s gone.

6. Set Financial Limits

One way to help your child curb first-year spending is to propose financial limits for unnecessary items. Setting a spending limit doesn’t necessarily prevent your freshman from making impulse purchases, but it should give him or her pause to assess whether or not the new iPhone is really necessary. By setting a fairly low limit – say, $50 to $100 per month – he or she has some wiggle room without having carte blanche when it comes to spending power. Add the nonessential money into your student’s proposed budget, separate from essential expenses such as gas and food.

While you can’t spend your time hanging over your student’s shoulder, making sure he or she is sticking to the plan, you can remind him or her of its importance. If possible, you can also help lighten the load – if you know your student is strapped for cash and you have the means, send a care package with nonperishable food or a prepaid gas card to campus.

Set Financial Limits

7. Avoid Full-Price Textbooks

Ah, the textbook – the budget-breaker of college students everywhere. While it’s true that some professors change and update texts practically every year, the vast majority use the same textbooks year after year. That means your student shouldn’t have to shell out hundreds to shop for books before class.

There are lots of ways your student can save money on college textbooks, such as searching for posts on campus bulletins, or shopping at eBay and Amazon. Or, have your child check out websites such as Chegg, where many common textbooks are available for rent. Some schools also offer textbook rental programs, so ask the bookstore and library about the options that are available.

Unless it’s absolutely necessary, steer your student away from the campus bookstore, where prices are likely to be the highest. Also, be aware that some professors add “suggested materials” to the book list, many of which may not be necessary for passing the class. Help your child look over his or her syllabus to weed out the necessary texts from the suggested ones.

When the school year is done, suggest that your student sell used textbooks to others who need them the following semester. School bookstores, online book retailers, and social media sites are all good places to advertise textbooks for sale. Your student can recoup some of the cash spent on buying books, making it available to pay down student loans, pay off credit card debt, or add to savings for next semester.

8. Protect Personal Information

When it comes to identity theft, college students are some of the hardest hit and the most oblivious to the crime. According to Javelin Strategy and Research, the 18 to 24 demographic has the highest risk for identity theft. Not only that, but the average individual from that demographic took 132 days to detect and report the fraud.

Caution your student not to share personal information. Simple things like giving a password to a friend, providing Social Security numbers where unnecessary, or leaving personal documents lying around, can all open your child up to identity theft.

To catch theft before it goes too far, students should check bank and credit accounts regularly, reporting any suspicious activity immediately. While identity watch services are available, the monthly fees may not fit into a college student’s budget. Instead, teach your child to pay attention to his or her accounts and suggest he or she order a free yearly credit report from all three of the reporting bureaus through AnnualCreditReport.com. There is, however, an argument for an identity security service such as LifeLock if your student thinks his or her identity has already been compromised.

It’s an unfortunate drawback to college life, but if vigilant, it doesn’t need to color your freshman’s first-year college experience.

Final Word

When you send your freshman off to college, you’re not just ushering in a new era for your family, you’re also looking to see whether all the advice and financial training you’ve given your child really pays off. Nobody always makes perfect financial decisions, but if you’ve laid out a solid foundation of training, your child should make it through the first year without making too many financial mistakes.

Posted in Financial freedom, Kids, money management, Parenting, teaching teens

Teaching Children About Finances

Posted on by Tim Connolly

Financial education for kids is a completely vital part of their upbringing in this contemporary age while it can be disastrous for young humans to be unable to deal with their budget nicely. It is very vital that children examine early that awful economic making plans can cause issues during their existence.

Children have to be introduced as much as recognize what money is and learn the benefits of saving and spending accurately. Here are some pointers that will help you to train your youngsters what cash is and how it can be each a blessing and an anvil around their necks relying upon how they take care of it.

A. Young Children

1. The Cost of Everyday Items

When children are able to depend, educate them the way to matter the usage of money. Teach them the distinction between the various coins and denominations of payments. Show them how tons of money they want for regular items: a Hershey bar, gum, pencils and different matters they use every day.

2. The Advantages of Saving

As they grow older, provide an explanation for how their allowance would no longer be enough to buy them something high priced, which include an eye, bracelet, football or their very own mobile phone, however in the event that they saved a certain quantity each week they may have the funds for what they desired after a time frame.

In different phrases, teach them what saving means and why they shouldn’t spend all their cash proper away. You should maintain a few allowances returned for them as ‘financial savings’ and pay them ‘interest’ in it, teaching your young kids how cash can grow if they don’t spend it immediately.

Three. Money as Earnings

Many households pay their children for sporting out chores. Washing dishes, tidying their rooms and helping mom with the shopping. Many regard this as a form of reverse blackmail – you do not get pocket cash unless you assist with the chores. You can triumph over that by means of giving them a simple weekly allowance, after which more according to the work they do for the duration of the week.

Those that do not paintings so tough will quickly see that their siblings that do are earning extra allowance then they may be. You can also ‘keep’ that more money for them, or a proportion of it, until college camp, the vacation period or to spend on their summer season vacation.

Including the saving aspect above, you can show them that through not spending $50 in their earnings, however saving it, they get $ fifty-five from you, or whatever seems an inexpensive interest fee. You would possibly even agree to suit what they shop so they in impact get a hundred% hobby.

Four. Explain Household Expenses: The “Cost of Living” Concept

Explain your own household fees in your kids once they have a rudimentary information of budgeting. Explain why you need to store for utility bills, hire or mortgage and insurances. How there are constant monetary commitments which include those, after which the regular expenditure on meals, apparel, tour and other prices. Let them remember the fact that the whole lot has a cost, and it’s far critical to have enough cash every month to satisfy the constant prices before you can take them to the cinema, ball sport or McDonald’s.

B. Older Children

Up until a positive age, you may have looked after your kid’s savings yourself, and exerted an excessive degree of manipulating over their spending. As your youngsters grow older and feature a rudimentary hold close of what cash is and how it can either be spent or saved until they have got enough for something they really want, you can train them the responsibility of searching after their own cash.

They will benefit an understanding of banking, investment and the importance of dwelling inside their manner – no longer spending extra than they make or get hold of. Here are some methods of coaching your older children, who are in effect teenagers, the importance of budgeting and using credit score well.

1. Open a Bank Account

Once they’re vintage enough, open a financial institution account for them. You can be responsible for maintaining it and will have to authorize their withdrawals until they reach a positive age, but through doing this you will make them experience ‘ growing up’ and liable for their very own cash – even if it’s miles a weekly allowance, or ‘pocket money’, paid into their account.

Explain the concept of hobby once more, and how they make cash by preserving their cash in the financial institution and now not spending it.

2. Make Them Responsible

When they want to make a withdrawal, by no means refuse, but speak it with them and subsequently comply with them making the withdrawal. If they spend all their money too fast, then that is as exact a lesson as saving all of it. Allow your children duty for their own cash, BUT – additionally, lead them to account if they spend it too soon.

This is particularly genuine if you have different youngsters who’ve saved for a weekend camp as an instance. They might be miffed in case you supply the spendthrift cash after they have saved up for it. That’s just an instance, but you get the idea!

3. Teach Budgeting

Take your kids shopping with you, and show them how a few items fee greater than others. If they want their very own portable DVD participant, display them the cost and relate that to their allowance – how a great deal so they should save for what number of weeks? Offer to fulfill a percent of the cost if they keep the rest.

Four. Explain How Credit Works

Show your youngsters your credit score playing cards and the way they paintings. Let them see you operate them in stores, and then display them the payments while they come in – that impresses on them that the whole thing should be paid for. Also display them the hobby price, and provide an explanation for this is the fee for borrowing money.

5. College and Credit Cards

It is critical that your kids grow up with a knowledge that credit fees money, but that every so often it is able to be worth it if the object bought is critical. Once your children are prepared for college, give an explanation for the significance of the use of credit cards simplest whilst necessary, except they have got sufficient saved to cover the monthly bill. Explain interest, expenses and what takes place in the event that they handiest pay the minimum amount.

Take some time on an ordinary foundation to speak about economic subjects with your children. You could have a fashionable meeting when you all discuss hobby rates for borrowing towards saving, and the specific methods they could shop. You could also observe that up with a private discussion with every one of your youngsters one by one regarding their personal finances. How an awful lot they have saved, and how much interest they’ve earned. Discuss how an awful lot it fees to borrow cash for things they want in comparison to the value in the event that they stored for them instead.

There are many approaches if you want to teach your youngsters approximately cash, household price range and how to look after their personal costs of an ordinary dwelling after they depart the nest. Whichever way you do it, you have to make sure for your own mind that your youngsters have at least an affordable understanding of the way to appearance after their own price range as a way to permit them to start out dwelling their personal lives with excellent historical past information of household budget and the relative advantages of borrowing and saving.

Posted in Kids, money management, Parenting, teaching teens

How to Teach Your Children about Savings and Value of Money

Posted on by Tim Connolly

Teach the time value of money practically

Money is an important thing to discuss. People think that it is not worth discussing in front of children but in real fact, it is not a topic to avoid from the children. To make them saving worthy they should know the rules of finance and money.

Teach the difference between NEED and WANT

Children should be taught from an earlier age that NEED always comes to some steps forward than WANT.  The basic things that we can’t live without or living is hard, is the NEED. So at first always has to go to meet the NEEDS, then the meeting of WANTS is a bonus. These lessons help them all over their lives. It is very necessary to differentiate the NEED and WANT. Your children should have the ability to choose between a curriculum book or a game CD.

Help them to save by making an attractive arrangement

Children are fanatic of colorful or attractive arrangement. Think for a while, the child not fond of studying can suddenly love it if you give him or her a nice table made with favorite character drawn on it. The saving arrangement is also like that. If you arrange them making a piggy bank or others as their liking, the tendency for saving automatically arises.

Give some opportunities to them to earn

Earning just not comes with the pleasure, it comes with so many responsibilities, we have to remember that and help out children to remember that too. So give some scope for earning of their own. For example, you can give some household chores every day and give allowances against these. They can know the value of hard work behind earning the income.

cashmanagementbykids

Set a goal of saving for them

Then you can help them to spend and save those earning and unused pocket money. Just advising for saving is not enough to save. You can set a goal so that they would get interested to save like if they want to have a bicycle, ask them to save for this. Then they can be more encouraged ever than before to do hard work for getting a thing on the wanted list.

Managing cash is one of the effective ways of good financing

If you can’t do the cash management for the time value of money you can’t be a good cash manager. In real life, all of us are cash managers who deal with it continuously. For this, you have to track the income as well as the spending to maintain the present cost and saving.  After paying an allowance to the children, help them to keep track the earning and expenses by recording these.  By keeping records they can also think and make a decision that how many days they need to reach the particular saving goal.

Give the feel of borrower and lender 

You have set the goal, done the arrangement for saving, teach the cash management. Everything is fine. But things happen generally that your child is impatient of having his or her demand-able things. Then you may do one thing, borrow money with interest and tell that he or she can buy the things instantly but opt for a high amount of repayment as the saving is not enough.

kidssaving

The fact is that he or she has to pay the value of the impatience with the interest amount; otherwise the exact amount is enough to pay after meeting the saving goal. Thus they can learn about the patience of spending since childhood that they have to demand the things when they are ready for those Otherwise, things would be more costly.

Have the example of saving is a great way

Children learn by seeing things. They behave the way you behave. If you can show them your saving mentality, the interest in them can run on. So have a jar for the saved money and put money there every day, with the little contribution every day it will turn into a jackpot with time. Thus your children can have an interest in saving for the long term gain.

Communication about money

Most of the parents feel it unnecessary or fear of negative effect to communicate about the money. But it works so well beyond your imagination. To discuss money, its value, and talk about saving and investment, the advantages of saving for future profile and stress-free life.

Money apps for saving and investment

Teenage children can have a better option of technology to save money that is money-saving apps. For teaching teens about money these apps help to save and invest money according to different factors. These work by analyzing your saving behavior and goals. Some apps work just like the game so that the account holders enjoy the financing activities.

Various apps have brought distinct functions for the criteria of savings. You can download any of those on Android or iPhone and use those effectively.

Conclusion

Openly discuss the activity of money in human life, its honest and wise usage to have a secured life with all the enjoyment in all time.

Posted in Financial freedom, money management, Parenting, teaching teens

19 Ways to Teach Kids How to Save Money Responsibly at Any Age

Posted on by Tim Connolly

According to a MarketWatch report, children between the ages of 4 and 14 received an average annual allowance of $471 in 2018. That’s about $9 per week, which isn’t a bad take for kids too young to join the workforce.

The report, on a study by chore-tracking app RoosterMoney, had even better news: Nearly half (42%) of children who receive an allowance save some of it. Although kids clearly don’t have the same financial obligations as their parents, that nevertheless bodes well for the next generation’s financial fitness.Sign up for a BBVA Online Checking account by 8/21/2020 and get up to a $250 bonus and no monthly fees.

If your kid isn’t among the many already socking cash away for a rainy day, you can take some commonsense, age-appropriate steps to raise their saving game.

Here’s what parents can do, and when, to prepare their kids to spend and save money wisely as they grow – and to ensure that they continue to practice good fiscal hygiene when they finally leave the nest.

Elementary School and Earlier

1. Talk Openly About Money With and Around Your Kids

Time and again, I hear the same refrain: “It’s never too early to start focusing on how to teach kids about money.”

Take this logic one step further and resolve to speak openly about money with and around your kids. In other words, feel free to discuss sensitive financial matters, such as salary negotiations and the status of your retirement accounts, in the presence of your kids. Talking about money around young children might feel awkward at first, but there’s no good reason to shoo them out of the room so that “the grown-ups” can have a frank discussion.

Young kids might not understand everything you discuss, but that’s okay. They don’t understand all the words in the stories you read with them either. That doesn’t stop you because you trust that they’ll pick more up with repetition and age.

2. Lead by Example

Practice what you preach, if you prefer.

You’re your kids’ most visible and important role model. (This may change during their rebellious adolescent years, but they’re all yours during elementary school.) By visibly following through on the fiscal wisdom you dole out to your kids, you show them that it’s possible to live within your means.

Kids are perceptive, and they’ll often pick up on cues even when you don’t explicitly call them out. But your message will ring clearer – and stick longer – with some good-natured repetition.

So, when you want to convey a money management concept to your child, explain why and how you’re doing it. And look for teachable moments wherever you go. Mundane activities, like shopping outings, are ripe for reinforcement. It takes just a few seconds to explain to your kid why you chose the cheaper generic option over the functionally equivalent name-brand option – why pay a premium for a fancy label?

3. Give Them Fake Money

It’s not as cruel as it sounds. Fake money is a great way to teach young kids about the value of money without actually entrusting them with any hard-earned cash. Think of it as training wheels for budding consumers, with you (the parent) playing the dual role of banker and merchant. Set reasonable values for various chores (cleaning up after a meal), privileges (stretching bedtime), and items (snacks)

And, yes, you can use Monopoly money if that’s what you happen to have on hand.

Give Children Fake Money

4. Avoid an “Open Wallet” Policy

Don’t give your kids an open line of credit. Instead, set constraints on spending, even if you can afford to spoil them every once in a while.

You’ve surely gotten used to telling your kids “no” on other matters. Putting your foot down on requests for cash or parent-aided purchases is no different. It’s important to lay out this marker early in your kids’ financial education. The longer you wait, the harder old habits will die.

How hands on you’d like to be is up to you. You can go so far as to set up a household “bank” – not a real custodial account in an FDIC-insured bank, but a pile of money whose balance is known to you and your children. This way, your kids will know exactly how much they can spend each week or month – and they won’t be surprised when they hear “no.” Over time, they’ll realize that they have to save up for bigger purchases.

5. Be Equitable

If you dole out an allowance to young children without requiring work, make sure it’s equitable on an age-weighted basis (you can give “raises” every year or quarter). If you pay wages for chores, assign equal amounts of work and an equal pay rate.

The younger your kids are, the easier it is to treat them equitably. Or so you’d think. According to data from BusyKid, a personal finance app for kids, girls receive less than half the weekly allowance given to boys – a starker divide than the gender pay gap for adults. That’s not fair, and not consistent with the principle that every kid deserves the same chance to succeed.

Eventually, extenuating circumstances might render equitable financial treatment impractical – for instance, you’ll probably need to provide more support to the kid who gets into Princeton than the kid who enrolls in a technical certificate program at the local community college. But that’s likely years off – we’re talking about kids in elementary school here. There’s no reason not to start your little ones out on a level playing field.

6. Use Praise and Tough Love

Use a combination of praise and tough love to instill fiscal discipline in your brood. When your kid makes a deposit into your home’s “bank” or tucks a dollar bill away for a future purchase, tell them they’re doing the right thing. If you’re feeling exceptionally generous, throw in a low-cost treat, like an extra half hour of screen time that evening.

By the same token, you can encourage your kids to make sound financial decisions by holding your financial fire when temptation strikes. Remind them that, by spending today, they’re deferring or forgoing future purchases that they may value more. Don’t punish them for overspending; just make it crystal clear what they’re missing.

Use Praise Tough Love

7. Use Age-Appropriate Spending and Saving Apps

You use apps for everything else these days. Why not at-home financial education?

There are too many legitimate financial apps for kids to name. These apps were specifically called out by my sources, but I’d encourage you to look for additional resources from legitimate sources like the Consumer Financial Protection Bureau.

  • Greenlight. Greenlight bills itself as “the world’s first smart debit card for kids that enables parents to pick the exact stores where their children can spend,” says co-founder Tim Sheehan. In other words, it’s a reloadable prepaid debit card for kids that parents supervise and control. Features include instant loading, real-time notifications every time the kid uses the card, the ability to instantly turn the card on and off, and a change collection setting that lets parents keep their kids’ change. In short, says Sheehan, Greenlight lets “parents give all the advantages of digital payments to their kids, while keeping them safe and showing them how to save and spend their money in smart ways.”
  • Raise. Raise is a popular platform for buying and selling gift cards online. “Once you purchase a card, sold at a discount by a seller who no longer needs it, you can instantly redeem it online or in stores by showing the barcode on your phone,” explains George Bousis, founder and CEO of Raise. “There’s no need to worry about forgetting your cards at home in a drawer.” While Raise is not designed specifically for financial education, it’s useful for illustrating supply and demand in a way that even young kids can understand (and profit from). Sought-after gift cards typically sell at a smaller discount to face value – a great reminder that, when everyone else wants what you want, you may have to pay a premium for it.
  • BusyKid. BusyKid is another reloadable prepaid debit card that lets parents control how much kids spend and save. It also allows kids to buy publicly traded stocks with their allowance, providing a peek around the corner at more advanced personal finance concepts.

8. Pay Kids Fairly for Age-Appropriate Chores

I mentioned above that pay equity appears to start as soon as kids start earning money for household chores – well before they enter the formal labor market.

Assuming you’re okay with paying your kids equitably for equal work, you need to give them jobs to do. A properly instituted household chore schedule is the definition of a win-win. For parents, it’s a dumping ground for mundane, low-value tasks for which they lack the time or patience. For kids, it’s a buffet of practical learning opportunities – a long, low-stakes introduction to the sorts of rote tasks they’ll soon enough need to complete on their own.

What you don’t want your chore schedule to become is a “make work” project. Even in elementary school, your kids’ chores should be tasks that actually need to be done: washing dishes, dusting around the house, taking out the trash and recycling, cleaning and vacuuming floors, detailing furniture, and so on.

Chores are controversial though. Many parents question whether they should compensate kids for household chores at all; parents don’t get paid for doing the dishes or taking out the trash, after all.

A happy medium may be in order. Identify chores that, due to their physical or temporal demands, might be “worth” more than basic, everyday tasks. Think mowing the lawn, cleaning the bathrooms, or weeding the garden. Pay kids enough to encourage them to look forward to – or, at the very least, not actively avoid – these tasks.

Encourage Spending Saving Giving

9. Pay Them Interest

If you’re not ready to open a custodial or joint bank account for your child, find a way to pay them market-rate interest on the money they save.

This is a great way to convey to your kids that a penny saved truly is a penny earned – or, perhaps, two pennies earned – and that frugality pays off in the long run.

It’s also a great way to introduce very young kids to more complicated investing concepts, such as compound interest, and get them ready for middle- and high school math class in the process. Your kids won’t understand every step right away – I still don’t really understand compound interest, to be honest – but every bit of repetition helps.

Adolescence

10. Open a Custodial Bank Account for Them Early

Once you trust your kids enough to make their own spending and saving decisions without the aid of a piggy bank or closely supervised app like Greenlight, open a custodial bank account in their name.

There’s no real downside to getting this done early, given that your joint bank account opens a whole new world of teachable concepts, but younger kids won’t participate as actively in account management and may not take interest at all. You’ll definitely want to cross this item off your list by the time your kids hit tweendom – say, 10 or 11 years old – to give them plenty of time before high school (and, hopefully, their first job outside the home) to get up to speed on banking.

11. Get Them Excited About Money Management

This is an admittedly subjective directive, but the point is to get your kids jazzed about something – anything – that involves sound financial decision-making.

For instance: Although checkbooks are obsolete today, some personal finance experts recommend ordering checks on joint accounts anyway. Balancing a checkbook is a great way to demonstrate basic money management concepts.

If your family regularly donates to nonprofit organizations, get your kids involved in the process of selecting recipients and setting aside funds for quarterly or year-end giving. More likely than not, they’ll embrace the purpose-driven nature of the exercise; nothing conveys the power of a dollar like seeing firsthand its potential to do good in the world.

Excited About Money Management

12. Teach Them About the Importance of Avoiding High-Interest Debt

Many parents discourage kids from using credit cards altogether. That’s a perfectly valid approach to financial education – one that keeps them away from one of the most common drivers of consumer debt altogether.

Even if you’re fine with your kids using credit cards when they’re old enough, be sure to have the “debt talk” with them before cosigning a credit card application, warning in particular about the risks of carrying high-interest balances from month to month.

The “debt talk” isn’t just appropriate for budding credit card users. You can also use it to warn kids off from uglier forms of debt too, such as payday loans. This shouldn’t be a difficult sell, given the litany of consequences of bad credit: higher interest rates, higher car insurance rates, trouble renting an apartment or securing a cell phone contract, difficulty securing a job or obtaining a security clearance.

Anyway, sound credit management practices are sound money management practices. Every dollar they your kids don’t have to pay toward a carried credit balance is a dollar they can sock away – a dollar that’ll earn interest in an FDIC-insured savings account or grow in an investment account.

High School & Beyond

13. Teach Them About Taxes and Accounting

Millions of kids work part-time in high school. Before they take their first tentative steps into the labor market, they need to understand the difference between gross pay and net pay.

If you use a human accountant to prepare your household’s taxes, take your child to this year’s appointment. This is a simple way for your kids to learn that even parents must make financial tradeoffs – and that not all of the money you earn is actually yours.

If you prepare your taxes online, sit down with your kid and show him or her how the process works. If you or your kid don’t have time to complete the process in one sitting, just show them the ropes as you can. Should you find yourself in the market for a new tax prep portal, grab your kid and check out our regularly updated list of the best free online tax preparation software options, along with our head-to-head-to-head comparison of the three most popular tax prep products: TurboTax, H&R Block, and TaxAct.

If your family uses a certified financial adviser or financial planner, loop your kids in on those meetings too. Get them familiar with any online financial tools you use as well, including your brokerage or robo-advising suite. This goes back to the point I made earlier about transparency and frankness – you want your kids to have the whole picture.

14. Involve Them in Grown-Up Money Decisions

Why stop there? As your kids get older, involve them in grown-up financial choices – without using their input as the last word for any consequential decisions, of course.

There’s no limit to the complexity or duration of these grown-up decisions. The long, multi-step process of buying a house is a perfect opportunity to walk kids through a complex financial transaction that requires months of planning and preparation. Along the way, you’ll have countless opportunities to illustrate specific financial concepts, like down payments and amortization.

Not every family with teens and tweens is eager to move, of course. But buying a house is just one example. Buying a car is another great opportunity – and a more common one.

Grown Up Money Decisions

15. Encourage Them to Apply for Scholarships

The cost of higher education is rising faster than the rate of inflation. According to U.S. News & World Report, the rate of increase in private university tuition outpaced the prevailing inflation rate by more than three times between 1996 and 2015. The rate of increase in in-state tuition at public universities outpaced inflation by more than six times during the same period.

The case for higher education scholarships has never been clearer. For parents and students, every scholarship is a win-win proposition, simultaneously defraying tuition costs and providing crucial budgetary breathing room.

Plus, students are young, and their earning power in the workplace is modest. It’s likely more cost-effective for the average student to apply for a scholarship or two rather than slave away at a minimum wage job (and take crucial time away from studying) to earn a comparable amount. A relatively modest ACT score increase – say, from 28 to 32 – may net several thousand dollars in merit-based scholarships.

Here’s an example. If your kid studies 100 extra hours to raise her ACT score by 4 points and claim a $2,500 scholarship, they’ve effectively earned $25 per hour. Needless to say, $25 per hour is not a realistic wage expectation for most high schoolers, unless they’re coding savants. Traditional service industry jobs rarely pay more than $15 per hour, even with tips. Besides, income taxes further erode wage earnings; scholarships are tax-free.

I’ve seen the power of scholarships firsthand. I qualified for two academic scholarships in high school, collectively offsetting about $2,500 per year in tuition. This was basically a drop in the bucket for my private college, but every little bit helped. And, initially, I put most of my scholarship money into a CD, withdrawing funds as needed to cover tuition payments, buy books, and living expenses. I didn’t get rich on the interest, but it was a nice bonus, and a worthy exercise in self-restraint to boot.

16. Open a Brokerage Account for Them

By the time your kids are in high school, they’re old enough to learn the basics of investing.

Broach the idea of investing their own money with them, making sure to explain the potential risks – that they could lose principal, for example. If they’re interested, set up a custodial brokerage account and have them set aside a modest amount of their own money to invest. Encourage them to research companies they’re interested in, and read market and economic reports, before putting any of their money to work.

If you’d prefer to explore investing strategies other than traditional stock-picking, nudge your kids toward index ETFs and mutual funds with low expense ratios and favorable ratings. It’s easier to build a diversified portfolio – and convey the all-important concept of diversification – with low-cost index funds anyway.

17. Help Them Budget and Apply for Student Loans

Though it’s likely to be among your kids’ least favorite financial exercises, applying for student loans and budgeting for post-graduation repayments is a piece of the financial education puzzle. Kids who aren’t prepared to set aside significant chunks of their take-home pay for student debt service simply aren’t set up for frugal-living success.

Help Budget Apply Student Loans

18. Teach Them the Three Types of Personal Savings

Before they leave the nest, make sure your kids understand the three main types of savings: personal, emergency, and retirement. Give them an overview of each type of savings – what it’s for, when to contribute, and (most importantly) when to draw upon. If you need guidance, check out our article on the three types of savings.

19. Encourage Them to Open a Student Credit Card Account

Last, but not least: When your kids are old enough, encourage them to open a student credit card account.

Responsible credit card use is actually an effective savings strategy. When you pay your balance off in full each month, you avoid costly interest charges that eat away at your budget and stunt the growth of your personal savings.

But that’s not the only reason you should consider nudging your young ones to apply for a credit card once they’ve reached the right age. Many entry-level student credit cards earn cash back rewards on spending – usually 1% to 1.25% on every dollar spent, and sometimes more on spending in select purchase categories.

Some credit cards promise extra rewards for diligent students. One popular option, Discover it for Students Card, pays out a $20 bonus every year you keep your GPA above 3.0.

Encourage your kids to save their earned credit card rewards. This simple exercise can add up fast: If your college-age child charges $5,000 per year to a Discover it for Students Card account that earns an average of 1.5% cash back and maintains a 3.5 GPA, they’ll put away an extra $95 per year. For the typical ramen-chomping student, that’s a pretty good haul.

If you’re not surewhich student credit card is right for your youngster, check out (or ask your kid to check out) our regularly updated list of the best student credit cards on the market today.

Final Word

Kids are like snowflakes – they’re all different. So are parents.

You might not agree with every piece of advice I’ve collected here. That’s perfectly fine. As a parent, you have wide latitude to teach your kids the value of money and instill sensible spending and saving habits.

However you choose to teach your kids to save, never forget that it’s in your financial interest to ensure that they know how to manage and grow their own money for years to come. After all, you might rely on your kids’ thrifty habits to support you long after you hang up your hat for good.

Posted in Discipline in kids, Financial freedom, Kids, money management, teaching teens

How To Teach Your Kids Good Money Habits

Posted on by Tim Connolly

As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys or coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.

The question, then, is whether you’re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.

“Without a working knowledge of money, it is extraordinarily difficult to do well in life,” says Sam X Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative. “Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.”

Yet, plenty of parents aren’t helping their kids become financially literate. T. Rowe Price’s 11th Annual Parents, Kids & Money Survey found that nearly half of parents said they miss opportunities to talk to their kids about money and finances. And a quarter said they are very reluctant or extremely reluctant to discuss financial topics with their children.

Kids, on the other hand, are eager for their parents to share their wisdom. Half of the children surveyed said they wish their parents taught them more about money.

Even if you’re not teaching your kids, they will learn lessons about money one way or another. If you want to play a key role in shaping your children’s feelings, thinking and values about money, you need to give them the gift of financial literacy from an early age. Here’s how.

Start With the Basics at a Young Age

Renick has been teaching kids about money through his Sammy Rabbit storybook character since 2001. He has found that the earlier you start a child’s financial education process, the better. Lessons should begin before age seven, he says, because research shows that money habits and attitudes are already formed by then.

Once your kids are old enough to know they shouldn’t be sticking pennies in their mouths, you should introduce them to coins and cash. Explain what money is and how it is used.  Actually, showing them how money works is more effective. So let them see you making purchases with cash.

Even if you pay with a debit or credit card, explain to your kids that you’re using your money to make purchases. Chase Peckham, director of community outreach for the San Diego Financial Literacy Center, did this with his son and daughter when they were preschool age. When they shopped together, Peckham would show his kids receipts with the amount he paid. “By doing it over and over again, it became habit to them,” he says. “As they got older, they started to understand. That’s how we introduced money.”

Peckham says that his son understood how money worked by the age of 4, thanks to the receipt strategy. He had more trouble getting through to his daughter. But, by being consistent, he knew that “the light bulb would turn on” for her—and it did.

Instill a Habit of Saving

Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.

Learning to save isn’t just an essential money habit. “Saving teaches discipline and delayed gratification,” Renick says. “Saving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.”

Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. Then use short, simple messages to encourage your kids. Renick offers these examples:

  • Saving is a great habit.
  • I love to save.
  • It feels good to save money and build my future.

With young kids, though, you’ll likely have more luck teaching them to save for short-term goals—such as a toy they really want—rather than for the future, says Tim Sheehan, co-founder and CEO of Greenlight, a debit card for kids with parental controls. The father of four says that encouraging his kids to set short-term goals when they were little helped them learn the value of delayed gratification. As they have gotten older, they are now able to save for longer-term goals.

Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service such as Greenlight or FamZoo. These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest—at a rate of their choosing—on any of the money the kids choose to stash in savings.

Create Opportunities to Earn Money

Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. “Just about everyone values money they earn differently than money they receive,” Renick says.

Both Peckham and Sheehan say they wanted their children to learn that money is earned. There are some chores the kids have to do without pay because they’re expected to help out as part of a family. But if they want to get paid, they have to complete certain tasks.

Sheehan says his two youngest children who are still at home get a weekly allowance in an amount equal to their ages. Peckham did that initially with his kids but says they now get a “salary” that is deposited directly into their bank accounts each month. His kids have negotiated raises for their salaries by agreeing to take on additional jobs around the house, he says.

Help Kids Learn to Make Smart Spending Decisions

In addition to wanting his kids to understand that money is earned, Sheehan introduced an allowance system so they could learn to live within a budget. His two youngest children, who are 16 and 11, would constantly ask for money and “spend like drunken sailors,” Sheehan says. When he started paying them an allowance, he told them that was all the money they would get and that it was up to them to manage it.

“Amazingly, it worked,” he says. They track how much they have coming in and going out and how much they’re saving using the Greenlight app. Learning how to budget now will help them when they enter the real world, Sheehan says.

Peckham has allowed his kids to make decisions about their money since they first started earning an allowance. He gave them three jars for spending, saving and giving. Peckham told his kids they had to put some of their allowance in each jar but didn’t specify how much. The decision was up to them.

Peckham also is teaching his kids that spending isn’t always about buying things you want. He wants them to learn that they will have to spend money on things they need when they’re adults and can make the choice to pay people to do things for them. So if his kids don’t do certain things they’re expected to do to help out around the house, it will cost them.

In essence, they’re paying their parents to do those things for them. And the money comes out of their allowance. “I wanted them to make decisions about what they were willing to pay for and what they weren’t,” he says. “I want them to realize, for every choice they make, there will be a repercussion. Personal finance is about decisions.”

Show Kids the Value of Giving

A key reason that it is important for you, as a parent, to teach your kids financial lessons is because you can share your money values through those lessons. If you value giving to others, you can instill that value in your children by helping make it a habit for them from an early age.

You could do as Peckham did with his kids when they were little and create spending, saving and giving jars. The Greenlight and FamZoo apps allow kids to create giving accounts. Or you could help your kids set up a special savings account for giving.

Then help your children plan their giving by discussing what groups or causes they want to support. They can visit CharityNavigator.org to find highly rated organizations.

Teach Kids How Their Money Can Grow

Saving money is a great habit. But if you want your kids to learn how to truly build wealth, teach them about investing, Sheehan says. “I’ve tried to pass on this knowledge and insight to my kids,” he says.

All four of his children have custodial investment accounts he set up for them (minors can’t open their own accounts). Sheehan started teaching his two oldest children, who are 20 and 18, when they were young about how they could invest their money and see it grow at a faster rate. He’s still working to get his younger two children to understand. “Some are ready for it at a young age,” Sheehan says. “Some maybe a little bit later.”

If you don’t understand investing well, you could give your kids a book that explains how it works. Renick says his father introduced him to the personal finance classic The Richest Man in Babylon when he was 12 or 13. “That book really motivated me to want to invest and spend less than I earned,” Renick says.

You can help children get started investing by opening a custodial account with a brokerage such as Charles Schwab, E*TRADE, Fidelity or Stockpile. And Greenlight will start offering an investment option with its accounts later this year.

Model Good Financial Behavior

Just as important as the lessons you teaching kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.

Instead, make sure you model the behaviors around money that you want your children to adopt. Renick says that not only would his father encourage him and his brothers to do work around the house, but also he would jump in and help them out.

“Some of my favorite childhood memories are of having my father assist me washing cars and cutting grass,” Renick says. “He would also use those experiences to talk to my brothers and me about the importance of work and managing our money. He would share things like, ‘It is not how much you make, but what you do with what you make, that makes a difference.’”

If you want your children to develop good spending and saving habits, they need to see you making smart spending and saving choices. In short, practice what you preach. And preach with consistency. Educating your children about personal finance is a process that can take time. But if you put in the effort and continuously communicate a clear message about money, you will instill good habits that will serve your children well.

Posted in Discipline in kids, Financial freedom, Kids, money management, teaching teens

Are we ready for a cashless society?

Posted on by Tim Connolly

What might a cashless country look like?

By ‘cashless country’, we mean one where all payments are made digitally: by debit/credit card, contactless, mobile or online. A country with no physical currency.

In this context, going cashless might not seem like such a big deal. But doing away with notes and coins could actually have massive consequences for much of society – if it’s not handled well.

Benefits

So why get rid of cash?

 Crime depends on cash

Criminals use cash because it can’t be traced. All digital payments are tracked in one way or another. Get rid of cash and it’s much harder to move money illegally. And if someone steals your wallet, your cash is gone but you can block your card immediately.

 It’s easier to travel cashless

If you’ve got a draw full of leftover foreign currency, you’ll appreciate how much easier travelling cashless can be. And with favourable deals on specialist credit cards and peer to peer services, it can be better value, too.

 It’s easier to manage your money

Keeping everything cashless means, you can use money management apps, which can help you track your spending, give you AI assisted money advice and automatically set money aside for savings.

Risks

There are risks to not having cash as an option.

 Connection issues can block payments

Cashless works fine if you’ve got solid phone and internet connections. For much of rural UK, that just isn’t the case. If you’re in a black spot, you may not be able to make payments. And 10% of British households still don’t have internet. That means they can’t access online banking, which could lock them out of economy if there’s no cash.

 Older people and those on lower incomes may struggle

Perhaps most importantly, older people, disabled people, and those on lower incomes tend to use cash to manage their money. It’s often an issue of trust as much as habit – although that comes into it too.

Countries closest to a cashless society

Sweden is a shining example of how a cashless society might work. Cash already accounts for less than 15% of all transactions in the country, and much of Stockholm simply won’t accept physical currency.

They’re projected to become entirely cashless by 2023. And thanks to careful infrastructure planning, it seems to be working. Small traders can use Stockholm-based iZettle to take payments, and there is a task force looking into ensuring older people aren’t locked out of society.

On the other hand, India banned cash overnight in 2016 with disastrous consequences – costing at least 1.5m jobs and 1% of GDP – a cautionary tale of diving in without planning.

Britain is somewhere in the middle. We have better systems in place than India, but could certainly do with a bit more Swedish-style planning.

So far, it seems to be working OK. But there are real risks to eliminating cash altogether without making sure the proper infrastructure’s in place.

In today’s time being a parent its your responsibility to focus on financial education for kids as it is going to benefit them in the long run.

Posted in Financial freedom, money management, Parenting, teaching teens

How to educate your children on the cost of living

Posted on by Tim Connolly

For most teens, the promise of independence is exciting – moving away from their parents gives them the freedom to rule their own roost.

However, like everything else in life it comes at a cost. Whether they are planning on getting a room in University halls of residence, renting their first shared house or even buying their first flat.

You might have heard that our kids are waiting for longer than ever to move out with more than a quarter of 20 – 34-year olds still living with their parents, which is a record high. In part, this is probably due to the massive increase in the cost of renting. Although of course, it could just be that they can’t stand the thought of missing mum’s Sunday roast.

We all want our kids to be ready to deal with the costs of flying the nest. The question is – how can we help prepare them and to be true the best way is to start with teaching teens about money. We’ve been having a think about the practical ways to encourage your kids to think about the cost of living so they learn by doing.

Here’s a few ideas we came up with:

1

Set your kids a challenge. Ask them to list how much they think all the household bills cost each month… though you might need to offer them a reward to get them interested. Keep it simple, try using a template and look at their answers at the end. How close are they? After a few attempts, chances are their guesses will be on the money.

2

Set them the task to find you a cheaper energy provider online. Sure, it’s not the most exciting task in the world, spice it up for them. Transfer the anticipated annual costs (based on previous years) into their bank account and tell them that they can keep anything they manage to save by shopping around – it’ll be worth their while! The sooner they learn to navigate comparison websites and getting familiar with finding the best deals online, the more they’ll save over the course of the lifetime.

3

See if you can convince them to do the weekly shop for a few weeks by incentivising it in a similar way – tell them if they can make any savings without compromising on quality they can keep the leftovers for themselves.

4

Tell them when your insurance policies are up for renewal and see if they can make a saving. This is a particularly interesting way to teach your kids about the costs of living because they may not profit immediately. Instead, it will reward them for setting a reminder that your policy is coming to an end later in the year – so long as they put in the effort and find a better deal.

5

Encourage them to create a monthly report or spreadsheet to keep track of all the bills. Try and position this in a way which emphasizes how much it will help you, rather than them – this way it seems more like a valuable family responsibility and less like extra homework.

Whether it’s offering an incentive to help out with household bills or simply having a chat to encourage good habits, there’s plenty we can do to help our kids understand the cost of living. Don’t be afraid to think outside the box. Giving them responsibility will be both rewarding and educational. They’ll thank you in the long term – well, if they ever move out…