Fun And Easy Ideas for Raising Money for Smart Kids
Teaching kids about money can have a lasting impact on a child’s life. These seemingly small money lessons will help them when they need to budget during college, save for a honeymoon, and prepare for retirement. We share the lessons you’ll need to teach kids to save money so your child can go into the world as a savvy saver.
Buddy up to your kids and go shopping
Bring your kiddos on your next trip to the supermarket or mall. Give them a calculator or grocery shopping app so they can track purchases along the way. When you’re at a coffee shop or bakery, let them pay the cashier. Or use a stop at the gas station for a quick money tutorial. “I ask each of my children to help me pump gas, asking them to read how much it costs and telling them how the money transfers from my bank to the gas station,” says Catherine Alford, author of “Mom’s Got Money: A Millennial Mom’s Guide to Managing Money Like a Boss.” Besides making them feel more grown-up, these methods will teach them the costs of needs like food, clothing, and transportation, as well as the transactional aspect of money — concepts you can continue to build upon as they get older.
Get your video game on
When it comes to some digital activities, there’s more than meets the eye. For example, there are video games that allow kids to build virtual worlds while learning the basics of economics. While playing, kids can conduct transactions, protect their assets, monetize their skills, and take other important financial actions. With a little research, you can find some rather fun and informative video games pervaded with financial concepts. Some popular games even give players the opportunity to upgrade their homes and pay off their debt by doing a variety of things like selling collected bugs or fruit.
Give them the power
Let’s face it: Kids don’t get to make a lot of their own decisions. From distinguishing between wants and needs to save for multiple goals, many money lessons involve choices. Providing your child the ability to participate in decision-making can be a great way for them to learn financial concepts. “We do this on vacation where we have more opportunities for ‘fun spending,’” says Jim Wang, founder of the personal finance blog Wallet Hacks. “We ask our kids whether they’d rather play arcade games right now or save money for something later, like ice cream.”
Set up a movie night concession stand
Who doesn’t love a night in front of the at-home silver screen with all the fixings? Help your children create a movie night concession stand with things like popcorn, candy, and other snack staples. Encourage them to price each item according to what they think it’s worth and how much profit they think they can make. Then before the streaming starts, open for business and sell to family members. (Real money optional!)
Take a look, it’s in a book
The benefits of reading are endless, so it’s only natural that books can be used to teach kids good money habits. Not sure where to start? A quick internet search can give you great lists to work with. Or take your kids on an intergalactic adventure through the monetary cosmos with our Planet Zee gang. Then encourage them to have even more financial fun with our augmented reality Adventures with Zeee Bucks app, which lets them explore the concepts of earning and spending.
Planning a game night
Board games can wash away the blues of a rainy day or add fun competition to a Friday night. Whether accumulating a stack of fake money or building wealth by acquiring assets, board games can be an entertaining way to teach numerous financial concepts from budgeting to investing. Game night for the win.
Give them money management experience
Instead of stashing money on a shelf, young earners can go virtual. Consider celebrating a birthday, holiday, or major milestone by opening a savings account for your kid and making an initial deposit. Then set up Buckets in their Ally Bank Online Savings Account for spending, saving, and donating. Over time, they can play a part in choosing which to contribute to, while grasping the importance of charity and saving towards things they may want, like candy, a new phone case, or a Lego set.
Also, consider opening them a custodial account through a brokerage, like Ally Invest.
Note: An adult would be required to conduct all account activity until the child reaches the age of majority (which varies from state to state). At which point, the custodian (adult) can transfer the account funds to the former minor, who could then open a new account.
Use what your kids love the most
The important takeaway from all of these ideas? Tap your kids’ favorite things to talk about money. If they’re sporty, explain the cost of their cleats, shin guards, and soccer balls. Or if they’re captivated by building virtual worlds, capitalize on their love of video games to teach the basics of economics. When you find ways to demonstrate financial concepts using what kids love, it makes money matters fun and engaging — helping you raise responsible savers and spenders. and saving.
April is financial literacy month, and while many see this as an opportunity to focus on adults, the secret to long-term success lies in teaching children. No one is in a better position to accomplish this task than the parents.
Smart parents like you start their kids early when it comes to sports, and musical instruments, Here are ten tips offered by financial professionals for teaching money management to children.
Give Them a Goal
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Before kids can even read, they understand pictures. This means they’re more likely to be able to draw something they want before they can spell it. Use this visualization technique to help them establish small attainable goals. This is a great habit to develop early as it has applications well beyond money and will help both at school and at work.
“Encourage children to make goals,” says Nicole Watson, SVP/Territory Delivery Director at UMB Bank in St. Louis. “One way to teach young children financial responsibility, particularly saving, is by instilling a goal-setting habit. Make a savings goal chart and use stickers or drawings to visually demonstrate the amount of money saved each week. If your child wants to save up for a specific item, consider adding a picture representing what he or she wants to purchase with the saved funds as a motivation.”
Delay Gratification
The hidden secret to obtaining any goal but especially financial goals is patience. It takes time to build what is necessary to achieve what you seek. It’s actually easier to demonstrate this with modest money-based goals. That’s because there’s not a long wait between the anticipation and attaining that which you seek. This is important because too often kids “want it now.” So start small as you build the habit.
“Show the value of delayed gratification,” says Tremaine Wills, Financial Planner at Mind Over Money in Newport News, Virginia. “Instead of spending one dollar on candy today, save the dollar and keep saving until the child has saved enough to buy a larger desired thing like a new bike or game system. This is effective because it teaches discipline to put money to the side for a later much more rewarding benefit.”
Teach Them to Spend
In the course of setting goals and teaching patience, what you’re really doing is teaching your child how to spend. Still, don’t make this a theoretical exercise. Place your child in the position to actually make the purchase. They’ll learn (and remember) more from real-life experience than from any simulated role-playing.
“Make them pay,” says Josh Bennett, Founder of Vincere Wealth Management in San Francisco. “You’ll often have expenses for your child (hair-cuts, dinners, sports, textbooks…etc). Instead of giving them an allowance and paying for their needs out of your pocket, give them the money to pay for their own needs. For example, give them $500 per month, but then don’t pay for anything else for them. Make them pay their own bills. Make them choose between needs and wants. This will help teach them the value of a dollar.”
Tie Activity to Earnings
Now you’re ready to broaden the activity to include generating income. Think of the first three tips as basic training. Here’s your child’s first opportunity to take things to the next level. And the faster your child can reach this level, the faster your child can begin to master money in ways that can produce solid long-term rewards. As before, however, you want to start small.
“To teach children to save, create a setlist of chores they can do that are age-appropriate,” says Jennifer Garcia, Managing Director for the Garcia Private Wealth Group of Wells Fargo Advisors in Encino, California. “Determine an amount that they receive for each type of chore and have the amounts vary based on the task. Then your child can start making decisions themselves on what chores they want to do. Make a chart to show them how much they have saved over a set period of time so they can see their progress. This exercise motivates your children to learn how to make choices and see the benefits of their ‘labor’.”
Be a Player Not a Spectator When It Comes to Saving
Once an honest day’s work begins to reap a steady income, your child is ready for the next stage: actual saving. You can’t save until you’ve learned to spend, and your child passed that test a few trips back. But you can’t truly save until you’ve found a way to get paid for doing work. Once you start bringing home the bacon, the door to saving opens.
And this means it’s time to “open a savings account,” says Watson. “Having their own independent account may encourage kids to save more money, and it will make them feel more responsible. Select a local bank and open an account, whether it’s a standard savings account or an account built specifically for parents and children. Consider asking the banker to discuss why saving is important so your child hears it from someone other than you. A monthly trip to the bank or ATM where the child personally deposits their new savings and receives a balance slip is a positive reinforcement that they are growing their account. Additionally, this repetition will help solidify the importance of stashing away money.”
Expose Them to the Magic of Compounding
OK, this tip is really just for advanced classes. Nonetheless, it represents a tantalizingly delightful piece of the financial knowledge pie that’s simply too tasty to put off much longer. As adults, we understand the power of compounding. Kids might not appreciate it immediately. Still, it’s a seed worth planting.
“I would encourage parents to inspire their children to save by showing them a compound interest table of how dramatically money can increase if you continue to save it over a long period of time,” says George Kinder, President, and Founder, Kinder Institute of Life Planning, Littleton, Massachusetts. “I’ve done this with my two 17-year-old daughters.”
Offer to Match Their Contribution
To really show actual compounding requires years and years of waiting. That’s probably too long for most kids. There’s a quick and dirty shortcut that does a good job of getting the idea across while at the same time encouraging your child to save. Think of it as the parental equivalent of the 401(k) plan.
“It can often be difficult to see the reward of saving during the early stages,” says Chanel Dorée, Wealth Advisor in RMB Capital’s Lake Forest, Illinois office. “Today, the $100 your child earned from walking the neighbor’s dog all summer will earn maybe $0.50 over the course of a year in their local savings account. However, if as a parent you are able to match what your child is saving, it is a much more impactful and rewarding training tool. This exercise opens the door for conversations about longer-term savings, the impact of compound interest, and one day, an employer match in a 401(k).”
Start Building a Great Credit Score
Here’s another advanced tip that moves your child up the financial literacy ladder faster than most. Be careful with this one, though, as it is ripe for abuse. On the other hand, when would you rather have your children make a “major” credit mistake: when they’re still living under your roof and “major” isn’t that big, or, when they’re on their own and “major” has a lot more digits in it?
“Get them a store credit card,” says Bennett. “I’ve worked with hundreds of teens from high school through college-age and most don’t have a credit score. Establishing credit can help them get low-interest rates and even employment. If they have to refinance student loans or buy a house after college, then starting early on credit can save them hundreds of thousands on interest payments. In-store credit cards are often easier for teens to get and harder to mismanage as they learn proper credit card management skills.”
Have Them See Their Progress
Remember how visualization helped young children “see” their goals more clearly. Spoiler alert: Things don’t change as you get older. Consider how long it takes you to watch a movie versus how long it would take you to read the book the movie was based on. Pictures, graphs, and charts all work wonders in communicating quickly and precisely.
Make sure your kids know where to find them, what to make and how to interpret them when it comes to their own finances. Start doing this at a young age and don’t stop, even when your kids are adults. There are a lot of creative ways to do this.
“Make the saving process visual,” says Aaron Shapiro, Founder, and CEO of Carver Edison in New York City. “Putting money in a clear jar that builds over time is a great example of this. People often forget that pennies turn into dollars and dollars into hundreds of dollars. By saving and fighting the urge to always spend money as you go, the jar will serve as a reminder of how quickly money can grow.”
Be the Best Example You Can Be
Finally, the apple doesn’t fall far from the tree. When the child sees how organized the parent is when it comes to operating the family budget, the message is clear and memorable.
“The best thing you can do is to be a good role model when it comes to saving,” says Schulz. “You may not think they are, but your kids are watching what you do and listening to what you say. If you spend like crazy and never give any thought to saving, your kids will see that and assume that it is the right way to handle money. However, if you make a point to save what you can and talk about it with your kids, that can have a huge impact. I’m not saying you should give your kids all the deepest details of your finances, but just letting them know that you’re saving because it is an important thing for your family can be enough.”
The best part of practicing these ten tips is that, not only will they give your kids money smarts, but you’ll sleep better at night knowing your kids are ready to leave your financial nest. and academic learning. Young minds are malleable at these ages. They’re more likely to pick up and retain fundamental concepts. And once they’ve got the basics down, they can more quickly move to the advanced topics.
With inflation on the rise (gas prices, grocery bills, health insurance premiums, etc.) and many companies being more conservative, more American families are feeling squeezed. So if you’re feeling guilty because you can’t buy your child that video game system he desperately wants or send him to that trendy summer camp, Eric Tyson has one word for you: Don’t. In fact, he says, now is the perfect time to teach your kids some valuable financial lessons.
“Kids are surprisingly aware of what’s going on in the world,” says Tyson, author of the new book Let’s Get Real About Money! Profit from the Habits of the Best Personal Finance Managers (FT Press, 2007). “And if they don’t know that times are a little bit tough and Mom & Dad are having to watch their spending, it’s time to tell them. Sheltering kids from financial realities does them no favors.”
Indeed, the opposite is true, says Tyson. A good grasp of personal finance is one of the most valuable life skills a person can have. And while previous generations may have been raised with the constant admonishment that “money doesn’t grow on trees!” too many of today’s parents neglect that lesson. It’s time to change that – and the economic slowdown we’re in now provides a great incentive for doing so.
“In many ways, a slower economy can be a blessing in disguise,” admits Tyson. “It leads families to make a budget and stick to it. It forces them to be conscious about how they handle money. That’s good for kids. It shows them how the world is supposed to work.”
Ready to get started? Tyson offers the following helpful hints:
1. Realize that kids learn what they live. It may sound like common sense, but you – Mom & Dad – are your kids’ most influential teachers. When you ring up a barge-load of credit card debt, take out exorbitant mortgages or car loans, and fail to save anything, that’s what your kids come to see as normal. If you are modeling unhealthy financial habits, you can’t realistically expect your kids to “do as I say, not as I do.”
“Adults who live it up now and fail to save for the future can expect to raise children who are accomplished spenders and poor savers,” notes Tyson. “Be honest with yourself about the powerful money messages you’re sending your kids. If your financial habits are poor, overhaul them now. You owe it to your kids.”
2. De-program them. Kids are constantly bombarded with information about what things cost, whether it’s the fancy sports car they like or the wardrobe of their favorite athlete or actor, not to mention the 40,000 commercials that the American Academy of Pediatrics estimates the average American child sees each year.
What they aren’t bombarded with is knowledge on how to manage money effectively. And while schools are increasingly incorporating money issues into the existing curriculum, the broader concepts of personal financial management still aren’t taught. Frightening though it may be, some schools rely on free “educational” materials from the likes of VISA and MasterCard!
“These credit card titans provide materials that implicitly and explicitly support carrying consumer debt as a sound way to finance significant purchases and living expenses,” says Tyson. “In fact, VISA and MasterCard school-supplied resources endorse spending upward of 15 to 20 percent of one’s monthly take-home income to pay credit card and other consumer debts! Explain to your kids that such spending puts a lot of money directly into the credit card companies’ pockets, so of course, they’re going to offer that advice…but that smart people don’t listen to it.”
3. An allowance is a great teaching tool. You don’t have to break child labor laws to find great ways to help your kids earn their allowance rather than just have it handed over to them. A well-implemented allowance program can mimic many money matters that adults face every day throughout their lives. From recognizing the need to earn the green stuff to learn how to responsibly and intelligently spend, save, and invest their allowance, children can gain a solid financial footing from a young age.
“A great time to start is when your kids reach the five-to-seven age range,” says Tyson. “Start them on some household chores, and explain to them that they will be paid for their work. Of course, the size of the allowance should depend, in part, on what sorts of expenditures and savings you expect your child to engage in and, perhaps, the amount of ‘work’ you expect your child to perform around the house. I recommend paying $0.50 to $1.00 per year of age. So, for example, a six-year-old child would earn between $3 and $6 per week.”
4. Start them saving and investing early. It’s never too early to start saving, and the sooner you can instill the importance of saving money into your kids the better. After they start earning an allowance, have your kids save a significant portion (up to half) of their allowance money toward longer-term goals, such as college (just be careful about putting money in children’s names as doing so can harm college financial aid awards). Tyson recommends that children reserve about one-third of their weekly take for savings. As they accumulate more significant savings over time, you can introduce the concept of investing.
“Rather than trekking down to the boring old local bank and putting the money into a sleepy, low-interest bank account, I prefer having kids invest in mutual funds,” says Tyson. “Another option is for kids to buy individual stocks. Kids can learn more about how the financial markets work and understand stocks better by sometimes picking individual stocks rather than using funds. Just be careful to keep transaction fees to a minimum and teach your kids how to evaluate a stock and its valuation and not simply buy companies that they’ve heard of or that make products they like. The money they can save and invest will be a huge help to them later on in life.”
5. Reduce their exposure to ads. The primary path to reduced exposure to ads is to cut down on TV time. When kids are in front of the tube, have them watch prerecorded material.
You can direct the television viewing of younger children, in particular, toward videos and DVDs. And for older kids, if you use digital video recorders (DVRs), such as TIVO, you can easily zap ads. But when an ad does sneak under the radar and set the kids to beg, address it. Explain to your kids that there’s never a good time for frivolous impulse spending – but it’s especially harmful when money is tight.
“Invest the necessary time to teach kids about money. Also explain that advertising is costly and that the most heavily promoted and popular products include the cost of all that advertising, so they’re paying for it when they buy those items.”
Growing up in my family, the first rule of money was this: We don’t talk about money. All I ever knew is that we had more than enough. While my parents did encourage me to work both around the house and at part-time jobs, there wasn’t a whole lot of guidance when it came to learning how to save or control my spending.
As a result, my journey to financial peace has been full of giant mistakes and more than a little heartache along the way. I certainly don’t blame my parents—I take full responsibility for my stupidity—but I can’t help but wonder if I would’ve made better choices had I learned earlier all the things that I know now.
In any case, I am bound and determined to help my kids avoid the mistakes I made. I want them to grow up confident and secure, and to understand exactly how money works and they can make it work for them. It is a tall order—after all, they are only 4 and 7—but I believe in my heart of hearts that it not only can be done, but that it is one of the most important things I will ever teach them.
A couple of weeks ago I received an advance copy of Dave Ramsey and his daughter Rachel Cruze’s new book, Smart Money, Smart Kids: Teaching the Next Generation to Win With Money. I’m already a huge fan of Dave Ramsey’s principles, but this book blew me away. It was SO inspiring! I loved reading about the process of teaching kids about money from both the perspective of a parent and a child who was taught well from the very beginning. While it solidified the conviction I already felt, I also came away with some very practical ideas for exactly how to raise money-smart kids. (The book comes out this coming Tuesday, but if you preorder it you will get $50 in freebies, including both a digital and audio copy of the book.)
7 Smart Things to Teach Kids About Money
And while the following list is certainly not all-inclusive, these are the seven things I most want to teach my kids about money:
Money Comes From Work
It is pretty scary to realize that most kids these days—and even many parents—don’t understand this very basic concept. Dave and Rachel recommend setting up a commission system—where kids get paid for the work that they do—rather than offering them a weekly allowance. That commission then gets split into 3 separate envelopes—one to spend, one to save, and one to give.
We have set this up in my house, and let me just tell you, it works! The closer it gets to payday, the more enthusiastic my girls become about helping out around the house. They love filling the checkmarks in their chore chart, (we use the ones in this Financial Peace Jr. set) and then counting up their money at the end of the week. Our payday happens on Sunday night so they have all weekend to boost their payout. Their chores and pay scale are based on their age—7-year-old Maggie has a few harder tasks that can earn more money, while 4-year-old Annie simply earns a quarter per checkmark.
When it is Gone, It’s Gone
Teaching kids that actions have consequences is a lesson that goes far beyond money. It is so hard to let your kids fail sometimes! Both my husband and I have a really hard time with this, especially when it comes to money. Rather than letting them make bad choices and then experience the consequence of that choice, we simply say, “no, you can’t buy that,” and all their money stays in the bank. After reading Smart Money, Smart Kids, I realized that we do need to let them experience the process of spending the money that they earn so that they can also learn that when it is gone, it is gone.
It’s Okay to Wait
We live in a world of instant gratification, one that is becoming more so all the time, and there are sadly far too many kids who grow up thinking that if they want it, they should have it right now.
A few years ago, as the director of a large day spa, I saw this all too frequently with my entry-level front desk employees, who were mostly girls in their late teens and early 20s who thought working at a spa would be glamorous and easy. I can’t even tell you the number of times one would ask for a raise after just a week—or sometimes even a few days–of work. They had been so accustomed to being rewarded for nothing, they had no concept of delayed gratification. It was sad, and as an employer, extremely frustrating!
Through their commission system, my girls are slowly learning that it is okay to wait and save for the things they want. Right now they are each saving for a (ridiculously overpriced) Lego playset. $65.00 is a huge number when you are only earning $0.25 at a time, but they are both doing great. Each week they get a little closer to their goals, and each week they become a little more motivated to work harder. I’m pretty sure I will cry the day we finally get to go to Target with their jar full of money to pick out the toy they worked so hard for!
It’s Not All About You
Not long ago I was stopped in my tracks by one simple but life-changing question: What are you doing with God’s money? As a Christian, I believe that what I have is not my own. It is a responsibility I take seriously. I am called to be a good steward of the resources I’ve been given, and just, more importantly, I am called to teach my children to do the same.
But in all honesty, this calling is not a burden. There is no greater joy than teaching kids about money. We do this in lots of different ways, especially at Christmas, and our favorite ways to give are with our time, not our money. Even so, my kids must understand that the money they earn needs to be shared.
Each week, at payday, they first put a portion aside to put in their give envelope. They get to decide how much they will give, and they also get to pick the recipient, since at this point we are far less concerned with who they give to than that they experience the joy of giving. I’m sure our giving plan will evolve and adapt as they get older, but it will always be an important part of their financial education.
Tell Your Money Where to Go
Right now our primary focus is teaching our kids the basic concept that money comes from work. Even so, by teaching them to divide their money each week into their spend, save, and give envelopes, we are also trying to set the foundation for learning how to budget their money. We want them to learn while they are very young that if you don’t tell your money where to go, it will go away. It is a concept I wish I would have learned much earlier in life!
Don’t Buy Things You Can’t Afford
In today’s society, our instant gratification mentality has also transferred to our wallets, where we buy things we can’t afford with credit cards so that we can have them right now. Teaching my kids that credit is not the answer means that I have to be willing to live by this philosophy too. After all, if they see me buying whatever I want, regardless of my ability to pay, my warnings not to use a credit card won’t mean a whole lot, especially as they get older. Instead, our goal is to model for them a cash budget system, one where we save for the things we want just like they do.
As they get older, they will have to learn how to save for bigger things like college or their first car. While car payments and student loans have become the norm, they shouldn’t be. Kids today are graduating from college saddled with huge debts that in many cases could have been avoided with more planning and better choices. We are determined to not let our kids become a statistic by teaching them now that credit is not the answer.
Choose Contentment
While all this other stuff is important, helping my kids learn to live with a spirit of contentment is by far the most important lesson I will ever teach them. A wise person once said that there are two ways to be rich—one is to have everything you want, and the other is to be satisfied with what you have.
If we want to change the wage gap for our girls, we must teach money confidence and also provide skills of money management to children. When girls learn about money, they learn critical life skills like salary research and negotiation, and the need to maximize their incomes throughout their lives to build wealth and financial independence.
They also learn about investing and the power of compounding and time. That information can help girls learn to start saving early in their careers to ensure sufficient funds for retirement. Finally, girls’ financial literacy means a foundation for creating a life with opportunities and choices.
The scary financial story for our girls today is that despite the Equal Pay Act of 1963, and lots of press about Hollywood and other industry wage discrimination, women working full-time continue to earn a fraction of what their male counterparts do — coming in at 80 cents on the dollar in 2017, according to the U.S. Census Bureau.
Even scarier is that our academically successfully — and frequently superior — recent female college graduates continue to under-earn their male counterparts. According to a recent study by the Economic Policy Institute, recent female college grads earned 86% of what men earned in 2015, down from 91% in 2000.
SALARY NEGOTIATIONS
So, what does that cost women in a lifetime? Studies show that a half million dollars is what under-negotiations in a first salary can cost someone by age 60. Why is this still going on despite policy changes, publicity, and overall greater awareness of the problem?
One thought is that women earn less because they do not negotiate salaries as effectively as their male counterparts, if at all. So why not? Let’s take a step back and look at what happens as girls grow up and what they learn about speaking up for themselves.
Psychologist Carol Gilligan has shown that girls learn between the ages of 11 and 15 or 16 that it is dangerous to say how she actually feels, compared to younger girls who are more courageous.
Conversations with older adolescents can be marked by the phrase “I don’t know” when a few years earlier, the girls were outspoken and confident. Another psychologist, Mary Pipher, talks in her book Reviving Ophelia: Saving the Selves of Adolescent Girls about how girls who speak frankly are labeled negatively, and that girls are trained in society to be feminine and to “achieve, but not too much.”
In my experience as a mother and a teacher, I remember my middle school daughter and her friends starting to say that it was not nice to “brag,” which really meant avoiding saying positive things about themselves. Later, in my financial education classes with high school girls, I saw the evolution of that idea.
When asked if my students would ever try to negotiate a higher salary, one girl said she would not ask for more money if it could hurt the company or other people working there. Another girl said she would never speak up for herself; she would work hard and wait to be noticed.
MONEY CONFIDENCE IS THE ANSWER
So how do we break this cycle for the next generation of women? The answer is money confidence. Money understanding is multi-faceted. There is the knowledge that needs to be acquired, there are the skills that need to be developed, and then there are actions that need to be taken. For example, it’s not just enough to know that you should be earning what you’re worth, you actually have to negotiate the salary. In simple terms:
Money confidence is believing in your ability to take care of yourself financially. It involves the ongoing learning and demonstration of the skills, mindset, and deeper understanding of how the critical financial pieces of your life fit together. These pieces include human capital, wealth management, and value creation.
In one recent high school girls financial education class of mine, we discussed the context of women and money, looking at issues around the gender wage gap, women and work, girls’ rising ambition levels, and the importance of income in the overall financial picture. We did a fantastic exercise about salary negotiation, so the girls could begin to understand — and experience — that critical process.
When we came back together for a debrief of the activity, the girls discussed the challenges of the process and also the exultation when they had made a strong argument for a raise and got it. We talked about what it would take for them to negotiate a higher salary in a real-life situation. In the exercise, the girls had to make a case for why they should be paid more.
During the debrief discussion, one student remarked that she could see how much confidence in herself would align with what she would be paid in the future. The answer is obvious. Without confidence in your own worth it can be difficult, or even impossible, to make a cogent argument on your own behalf, or even start the conversation for a higher salary.
THE GENDER WAGE GAP
Salary negotiations can be tricky. Part of the process is speaking up about your skills and contributions, defining that value in the workplace, and asking for more of the employer’s scarce resources for yourself.
So, if you are someone who has grown up being taught not to “brag,” chances are explaining your skills and asking for recognition of your value is not going to be something that comes easily to you.
While the gender wage gap is caused by a number of different factors, an unwillingness to negotiate is certainly one of them. Carnegie Mellon economics professor Linda Babcock suggests that men are four times as likely as women to negotiate their salary.
When we look at the evolution of adolescent girls, it is easy to see where women’s reluctance in this area might come from. Once we know where a problem comes from, the solution becomes that much clearer.
As teenagers become more independent and begin to earn money, it’s important to set them up with a good foundation of knowledge in money management.
Here are a few of the key things to focus on so they can get a better understanding of how to earn, spend and save money from early on:
Hand over responsibility
At some point your children will need their own bank account. If they’re earning pocket money, it may be worthwhile opening a bank account with them before they reach their teenage years. Once your teen turns 14, they’ll be able to operate their account on their own. This includes the ability to remove any parent or guardian access.
No matter what age they are when you open it, giving your child responsibility over a bank account is an important first step. It will help them learn things like depositing money, checking their balance online, updating their contact details when needed and using an ATM.
Build a budget
Whether it’s through pocket money, a part-time job or a little bit of both, a budget will help you set some parameters around how the money coming in should be used, without having to constantly check what they’re spending their money on.
Take your teenager through a budget planner, setting amounts of money for spending on clothes, food and other things, and also money to be saved and even some money for charity.
Pay themselves first
If they’re wanting to build their savings, one of the best pieces of advice for your teen is to pay themselves first. This means having a separate savings account which earns interest, then when they’re paid, making sure they put away the saving amount allocated in their budget before doing anything else.
The longer money is in their transaction account, the more temptation there is to spend it. Having a separate savings account which is paid immediately can help reinforce the idea of money for spending and money for saving.
Equate money and time
Responsible spending is easy to talk about – you can talk about how some things may be necessary while others aren’t, and also how some items will be short-lived while others will last longer. But it can be hard to get comments like this to have any lasting effect on your increasingly independent teenager.
A more compelling way to think about the value of money is to combine it with the concept of time. For example, if they want to buy a pair of jeans, get them to work out how many hours in their casual job that equates to. Once they find out how many hours of hard work they need to do, it may change their view on whether it’s worth it.
Chat about credit
If they’re in their early teens, it’s most likely too early to think about a credit card, but the discussion will come up at some point. When it does, it’s important to make sure that they understand that credit is not free money. While a credit card may be suitable in some circumstances, they need to be wary of debt, even if it is for a short term.
Set the right example
One of the most powerful ways for teaching teens about money is by setting a good example for them to follow. If you use a budget, save money regularly, and are open about this with them, this will have a big impact on their understanding of how to manage money from an early age.
I think it hits you that your child is growing older when someone asks you how old she is, and when you share her age, they respond, “Wow! She’s in high school!!”
As a parent, you know there are certain skills you want your child to develop before they go off to college. Yes, those practical life skills and the most important one from them is teaching teens about money.
What is considered a life skill?
A life skill is any skill that is needed to manage the challenges and activities of every day, effectively.
HOW TO TEACH FINANCIAL LITERACY TO A TEENAGER
If your teen remembers these principles, she will be on the road to developing a sound money management habit.
It begins with budgeting and segmenting the money she receives every month.
Encourage her to start doing this even before she starts earning her own money. Practice with her pocket money.
Discuss together what percentages will work best while budgeting for the month.
1. SET ASIDE MONEY TO SAVE.
This is money that should not be touched, no matter what. Money that will be saved for college. Or later on in life, for a car, a house. All those important, big investments. If your teen is like my book lover, you will need to remind her that books, though great, are not considered an important investment.
2. SET ASIDE MONEY FOR EXPENSES
There are monthly expenses that are set but then there are expenses that crop up unannounced.
Set apart an amount that includes the required monthly expenses and a buffer for those unexpected incidentals. Encourage your teen to always document every expense, irrespective of how tiny it may be.
There are hundreds of free apps out there, but nothing beats pen and paper.
3. SET ASIDE MONEY TO INVEST
Investing money in stocks and shares is a popular choice, but it does not come without a great amount of risk.
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4. SET ASIDE MONEY TO GIVE
We’re teaching our kids to tithe 10% of our income, before expenses, to give to our local church. For your family, this may look different. This could include giving to a charity of choice or setting apart money to pour back into the local community.
The Best (and Worst) Ways to Teach Children About Money
There are many ways for teaching financial education to kids. You can purchase educational books and games and you can show them the basics of money management such as opening a bank account or balancing a checkbook.
However, some parents have decided to let their kids learn about money through trial and error. These parents strongly believe the school of hard knocks is a better teacher when it comes to financial literacy.
A recent survey by T. Rowe Price focusing on parents of children between the ages of 8 and 14 found that some parents want their children to learn about money by making mistakes. However, these parents are not providing support by having effective conversations about money management with their children.
Although the parents in this survey advocate the tough-love approach, they also say personal finance education in schools is important. Roughly three-quarters of the respondents agree that there should be a personal finance requirement for high school graduation.
“Parents need to put aside any reluctance to discuss money matters and find a balance between providing firsthand experiences for kids and talking about finances. While there is value in letting kids learn from mistakes, parents should also regularly discuss money, provide context and guidance, and use the real-life experiences to reinforce money conversations,” said T. Rowe Price Senior Financial Planner Stuart Ritter in a statement.
If you’re at a loss for how to approach financial literacy with your children, here are three steps you can take to educate them.
1. Consider enrolling your children in a money camp
There are several money camps and workshops around the United States that are focused on educating children in a social environment. Involving other children within the same age group will provide a fun and supportive environment. One top money camp for children is Camp Millionaire, which teaches children between the ages of 10 and 14 the basics of wealth building.
2. Introduce educational books and games
The books you choose don’t have to be long or full of financial jargon. Some book publishers and financial literacy organizations have developed a line of financial comic books for children.
There are also educational video games that make learning about money a fun, interactive experience. If you communicate the fact that financial education can be fun, you will be more likely to engage your children and leave them wanting to learn more.
3. Model good financial habits
Another way to impart financial knowledge is to model positive money management behaviors. When you are out shopping, demonstrate self-restraint by not grabbing a pair of shoes in every color or an expense new tech tool that you really don’t need. Show your children how to separate needs from wants.
Take your children grocery shopping and demonstrate techniques for saving money. Have them help you look for coupons or compare prices among circulars from local grocery stores.
WHY SHOULD WE TEACH ABOUT MONEY MANAGEMENT AT YOUNG AGE ITSELF
The earlier the child learns about managing, saving and investing money, the better money manager they would be in the future. Managing money is something that everyone should know. It’s like any basic activity.
If a person is a good money manager, he is likely to save his money and invest at a right place rather than wasting on any unwanted stuff. It also helps children understand the value of money at an early age and help them make better financial decisions. Also, children are likely to understand the difference between earning and spending.
Teaching kids about money helps them grow into adults that have a good relationship with money and money-related stuff. These all contribute to increasing the growing child’s financial sophistication, thus giving them a better financial outcome later in life.
There are a few basic things that you can teach your child:
Set an example: be careful to set a good example. Children watch their parents and learn from them.
Teach your kids about earning money: this is one of the best ways to teach. Let your children earn money by themselves, so they would be able to manage their earnings.
Teach kids about delayed gratification: Teaching this will help your children to combat with “buy now, pay later” mentality.
Teach kids to avoid impulsive buying: before you go shopping, create a budget. And focus only on those things rather than shopping extra.
Teach them to be wise consumer: before your child buys anything, teach them to search for any alternate ways of spending that amount of money.
Have a wish list: It’s hard for kids to prioritize things they want. Teach them to prioritise things and buy things accordingly.
Teach them the importance of giving: it’s good to teach your kids the importance of giving money. Be it in temple or charity.
Keep track: Apart from teaching them always keep a track of their spending and/or earning.
From feeding that first piggy bank to helping devise a budget for college spending, helping kids learn healthy money habits can take a lot of work — and patience.
But one thing’s for certain: Teaching kids about money is important, and the earlier you get started, the better. Read on for five good reasons why today’s head start could lead to tomorrow’s success.
#1: Strong behaviors build a strong foundation
The iconic behavioral psychologist Erik Erikson said that our foundations of growth and development are built within the first two years of life.
All other stages are built upon either a solid foundation of security or a rocky foundation of insecurity. Building a strong foundation of financial knowledge and money habits can help your child mature and develop with confidence.
#2: It all starts with you
Your kids will usually take over the habits, customs, or routines of their parents. When it’s all they know, it’s what they learn — and money is no different. Your values around money are reflected in your behaviors, and children catch on to behaviors quickly.
Especially at a young age, they will emulate their parents’ actions because they are their role models.
#3: Kids learn so quickly
Teaching kids about money early on won’t be nearly as difficult as saving the task for later, when they may have to un-learn some bad money habits. And as a rule, kids just process faster.
Research suggests it takes most adults 66 days to build a habit. Kids have the luxury of just being kids and absorbing the world around them, including information and habits. Make their money experience an everyday habit so they catch on, and it’ll probably stick.
#4: Good money behaviors become a habit
Like driving a car becomes muscle memory and instinct, money behaviors also become second nature. The earlier they are taught, the faster they catch on, and, with frequent practice, the more routine they become.
Becoming familiar with money and learning to count change, understanding both saving and purchasing power, and being comfortable inside a bank are all early foundational pieces of information that can grow into so many other financial opportunities.
#5: Knowledge really is power
Giving kids financial knowledge sets the tone for success. Knowing the basics at a young age — costs of expenditures, how to read a price tag, counting change, understanding the importance of both saving and giving — can help your child practice those important life skills while still safely under your wing.
Tim Connolly 