Tim Connolly

Money Management For Kids: How to Teach Kids Good Money Habits

Posted on April 24, 2022 by Tim Connolly

As a parent, it’s clear that you want the best for your children — not necessarily in terms of the best gadgets or the coolest toys, but in the form of security. If you’re thinking about laying down the right foundation to do well in life even after you’re gone, it’s best to teach them how to handle money.

In this blog post, here is everything you need to know for teaching kids about money.

WHY YOU SHOULD TEACH YOUR CHILDREN ABOUT MONEY

According to experts, it can be difficult to do well in life if someone doesn’t obtain a working knowledge of money. Because money is an integral part of daily life, parents should help their kids become financially literate.

Money is in everything we do, including:

What we eat
Where we live
What clothes we wear
Which car we drive
Which school we go to
How many kids we want
The kind of entertainment we choose
Which hospital we go to
What gifts we give to others
The insurance policy we have
The vacations we take

No matter what it is, money is always involved in our decisions. Yet, parents don’t seem to think that it’s essential to teach their kids financial literacy.

Other on the other hand, children are hoping to get monetary wisdom from their parents. According to the same study, some children wish that their parents had taught them more about the value of money.

Even if you don’t teach them about money directly, they need to learn lessons one way or another. If you want to shape your child’s values and thinking about money and provide them with financial literacy, follow the tips below:

START WHILE THEY’RE YOUNG

Studies show that the earlier you begin the financial education process with your child, the better. Experts believe that lessons should start before the age of 7 because research suggests that attitudes and habits regarding money already exist during this time.

Once your child is old enough to know that they shouldn’t be putting pennies into their mouths, it’s time to introduce them to cash and coins. Be sure to explain what money is and how it’s used — this should be followed by showing them firsthand how money works.

When you go out shopping, be sure that they see you making purchases with cash. Even if you use a credit or debit card, explain to your child that you’re using money to pay for your purchases.

Another effective way to teach kids about money is by shopping together and showing them the receipts for the amount you paid. This can be done as early as their preschool years, so be sure to do this over and over until it becomes a habit with them.

Some parents start their money-teaching strategies as early as 4 years or even younger. While some kids will get it after just a few times, others will struggle with the concept but the key is to remain consistent, and they will eventually get it too.

ALLOW THEM TO EARN MONEY

Your children need to have money to themselves so they can figure out how to use it. As such, it’s a good idea to provide them with an allowance or to give them some way to earn their money.

Having them earn their money as opposed to just giving it to them will have a different effect on them psychologically and will truly teach them the value of having to work for your own money.

We all look at money differently, but people will always value money that they earn over money they receive for nothing.

Parents can provide their kids with chores that they can do to get paid, which are then given to them as an allowance in an amount that’s fair for their ages.

Other parents prefer to pay their children with a “salary” that’s deposited directly into their bank account every month depending on how much work they do around the house. You can also discuss doing more chores in exchange for a bigger salary to teach them the value of hard work.

HELP THEM MAKE SPENDING DECISIONS

Apart from allowing kids to earn money, you could also provide them with an allowance system to teach them how to live within a budget.

If you have children who would always ask for money, setting up an allowance will show them how to budget their money and how to spend it wisely.

Doing this will teach your children to track their money, both what is coming in and going out, while teaching them how money works in the real world when it’s their time to go on their own.

Once they get started with an allowance, your kids can start making their own decisions about money.

One way to do this is by giving your kids three kinds of piggy banks:

One for spending
One for saving
One for giving

You can have your kids put their allowance into each of these jars, which will give them the freedom to decide how much goes where. Plus, you can teach your kids that spending isn’t always about buying the things they want.

Their money can also be spent on things they would need to buy once they’re adults and you could also give them the choice to pay people to help them do things.

For instance, if your child can’t wash the dishes for some reason, having someone else do the task will cost them.

The result is that they can pay you to do things for them — and all the money will come out of their allowance. This concept allows children to realize that every choice they make will have consequences because personal finance is all about decisions.

DEVELOP SAVING HABITS

Any early interaction that kids have with money is likely to involve spending — when they see you spending money to buy things, they will want to do the same. Because of this, it’s important to teach them that money isn’t just earned to be used, but can also be saved too.

Teaching children how to save isn’t just a good money habit, but it also allows them to learn delayed gratifications and discipline. Saving also teaches planning and goal-setting for kids, which in turn builds independence and security.

You can help your kids get into a habit of saving their hard-earned money by providing them with a savings jar where they can slowly save cash or coins. You can then give your kids simple words of encouragement, such as:

I love saving
You’re doing a great job!
It feels great to save money for the things you need

With younger kids, however, you’ll have better odds of teaching them the value of saving for short-term goals such as toys for birthdays, Christmas, or special occasions. Experts say that encouraging kids to set short-term goals while kids are young helps them appreciate the value of deferred gratification.

SHOW THEM HOW MONEY GROWS

While saving money is a great habit, teaching kids about investing is the best way to teach kids how to build wealth. By teaching children how to invest at an early age, you’re going the extra mile to ensure that your children get a headstart for the future.

Teach Teens, Teaching Teens About Money

How to teach your children good financial habits: 6 expert tips

Posted on April 24, 2022 by Tim Connolly

Paying attention financial education for kids is brilliant for teaching them the value of money and instilling good habits for their futures. But how do we approach the subject to get the important points across and hold their interest? Read his six tips below…

Set a good example

Kevin says: “If you want your children to develop good financial habits, you should try to practise what you preach.

“You can teach them to respect money, that it is not to be taken for granted, and it is certainly not in limitless supply. That might on occasion mean saying no to their requests, but this in itself is a good life lesson.”

Start with the basics

“It’s going to help children get to grips with the world of money if they know about the different coins and notes we use, and how much different things cost. Even if they’re using play money, they can learn about transactions and sharpen their arithmetic skills.

“But they also need to be aware of debit and credit cards and electronic means of payment such as digital wallets, especially if they see you using these when you’re shopping.

“You can also talk about the concept of shopping and paying for things online – and the importance of avoiding scammers, fraudsters and rip-off artists.”

Encourage them to earn and save

“Give your children the opportunity to earn rewards for their hard work, by offering them an allowance for completing specific chores or tasks around the house. And once they are earning that money, provide a place for them to save it too.

“It’s important to teach children from a young age that money isn’t just for spending – they should be saving money regularly if possible. A piggy bank is a good place for spare cash, and they can have their own account with a bank or building society if you open one for them.”

Set saving goals

“Helping your kids to define a saving goal, whether short or long term, is a great way to keep them motivated – and teach them the value of putting money aside with a specific purpose in mind.

“For younger children, short-term goals may be more beneficial, for example, saving for a toy they really want. As they get older, you can then start to introduce longer-term goals for higher value items, such as a games console, musical instrument or excursion.

“Parents can even add additional incentives to encourage children to save more money, such as agreeing to match the amount they save.”

Encourage budgeting

“If you give your child spending money every week or month, remind them that they might want to budget until next ‘pay day’, rather than spend it all at once.

“This is a hard discipline to master and they might not readily get to grips with it – let’s face it, many adults regularly find that there’s too much month left at the end of the money. But anything you can do to help them understand you can only spend money once – and once it’s gone, it’s gone – will be valuable.”

Take advantage of technology

“There are a number of financial apps targeted at children and their parents to assist in financial education.

“These can provide tips and guidance in a way that children will understand and appreciate. Make sure to involve them in the selection process if you can – an online environment is very much a part of their lives, so it’s important to have buy-in from the get-go.”

financial education, Financial freedom, financial literacy

5 Financial Tips for Teens

Posted on April 24, 2022 by Tim Connolly

Although the study identified numerous gaps in economic and financial knowledge, it also showed teens do know where to look for credible information. Two-thirds (67%) recognize they should use their school as a resource.

“One of the things we hear often is that some textbooks are written too academically for most students to understand the concepts,” said Jack E. Kosakowski, president and CEO of Junior Achievement USA. “Our programs, which work as a complement to the school curriculum, are written from the perspective of today’s teens and use digital content to help bring economic concepts to life for students.”

Beyond the classroom, another 63% of students believe they should use their parents as resources for economics education. Help influence the financial literacy of a teen in your life with these practical money-management tips adapted from the curriculum.

Set goals. Managing your money is more meaningful when you’re doing it with purpose. This might mean budgeting to ensure you have enough money to maintain your auto insurance and keep gas in your car, or you may be saving for a big senior trip. Knowing what you want to achieve with your money can help you plan how you spend it more wisely.

Weigh needs vs. wants. When you begin making your own money, it’s easier to indulge your own wishes and spend money on things you don’t necessarily need. To some extent, that’s not a bad thing; rewarding yourself is fine when you do so within reason. That means not exceeding your available funds, and not forsaking things you truly need, like gas money to get to and from a job or school.

Get a debit card. Most people find that having cash on hand makes it easier to spend. If you use a debit card instead, you’re an extra step away from spending so you have a little more time to consider your purchase. Another benefit of a debit card is it helps track your purchases in real time so you can keep constant tabs on your balance and ensure you don’t overdraft your account.

Start a savings habit. Even if your income doesn’t allow for much, it’s a good idea to get in the habit of setting aside a portion of each check. It may only be $10, but over time each $10 deposit can build your account toward a long-range goal.

Protect your privacy. Teens who’ve grown up in the digital age tend to be less skeptical and cautious about privacy matters than their elder counterparts.

It’s important that young people understand the potential impact of failing to protect their privacy when it comes to financial matters, including the possibility that their identities could be stolen and all of their money siphoned away. Teaching teens about money and it’s security is an essential lesson in economics.

Uncategorized

Money management for teenagers

Posted on April 24, 2022 by Tim Connolly

Your child learns by watching how you deal with money. So one of the best ways to help your child learn skills for managing money is by modelling responsible attitudes to money and money management.

For example, you can send responsible and positive messages when you let your child see you:

making a family budget and sticking to it
setting savings goals
setting aside money for emergencies
prioritising the things you need to buy over the things you want to buy
working hard to save for something
organising your earnings to pay bills
avoiding impulse buying.

Getting your child involved in household finances is a good way to teaching kids about money. For example, you and your child could do things like working out a savings plan for your next family holiday, or checking out better deals for your phone plans.

Encouraging responsible money management

As your child gets older, it’s a good idea to give your child more control and responsibility over their own money and how they spend it. With guidance, this will help your child learn important and lifelong money management skills.

It might help to work out some clear guidelines about using money with your child – for example, discuss how much can go into savings, spending and donating. And it’s important to guide your child towards saving money, rather than spending it all.

Your child will make some mistakes with money management, whether it’s spending a week’s allowance in two days, or spending a lot on something that doesn’t seem so good once they’ve bought it. Instead of giving your child more money, it’s a good idea to talk with your child about what they learned from the experience and what they might do differently next time.

It can be easy for teenagers to run up large mobile phone bills. It’s a good idea to talk with your child about different types of phone plans. You can suggest starting with a pre-paid plan that has a monthly limit, or agree to track your child’s spending on their phone plan to avoid overspending.

Spending money

Part of learning about managing money is learning to spend responsibly and appreciate the value of things.

These tips might help with your child’s learning:

Encourage your child to price and manage their weekly costs. This might include school bus fares, social outings and so on. A budgeting app can help.
Let your child buy birthday, Christmas or other presents for their siblings or other extended family members. Working out what to spend will help your child learn to plan and budget. And your child might also better appreciate the gifts they get from others.
Give your child a budget for their birthday party to decide what to buy or where to go.
Step in to help the first time your child runs out of money, but let them know that next time they’ll have to deal with the consequences.

It can be easy to spend more than you plan to using a direct debit or credit card. If your child has one of these cards, it’s a good idea for them to check their card’s account balance before making purchases. This way they’ll know how much money they have to spend.

Earning money

If your child wants to start earning their own money, there are many ways you can support this.

Some families give children and teenagers pocket money. If you decide to give pocket money, you might want to think about whether pocket money includes payment for help around the house. Some families pay children for a few extra jobs, particularly if it helps children towards savings goals. But other families feel that everyone should contribute towards household jobs without expecting payment. There’s no right or wrong – it’s about what suits you and your family situation.

Some teenagers want to earn their own money working outside the home. If this interests your child, they could look into doing informal jobs for friends or extended family – for example, feeding pets while people are on holidays, babysitting or cleaning cars. These kinds of arrangements also strengthen young people’s social skills and ability to accept payment graciously.

Your child might also be interested in a getting a part-time job. A part-time job can also help your child build skills, experience, confidence and contacts for future employment.

Saving money

As they grow up, children start to think about saving for things they want. This is a key step in learning money management and developing responsible financial habits.

These tips can encourage your child to save:

Encourage your child to always save some of their pocket money or birthday money.
Help your child set short-term and long-term savings goals. If your child is saving cash, you can use a chart to track how close they are to their goals. If your child is depositing money into a bank account, they can check their savings online.
Help your child set up a savings account with restricted access, making it harder for them to spend their money straight away.
Try a pocket money app. You can use it to set a savings goal with your child, choose a pocket money amount, and track saving and spending.
Encourage your child to shop around for the best savings account. Many banks offer no-fee accounts for people under 18 years.

Borrowing money and lending money

You’ll probably be your child’s first lender. This is a good chance to teach your child about the importance of repaying loans as part of money management.

For example, perhaps your child has been saving for some special sneakers and now they’re on sale. You might lend your child the last $20 that they need so they can buy the sneakers before the price goes back up. But you might also discuss and agree on a repayment plan.

You might also want to discuss borrowing money from friends, or lending money to friends. Is it something you encourage? You could talk about why or why not and the importance of paying money back as soon as you can.

Understanding digital money

Children often start learning about money management using cash, but a lot of money management involves digital money. This includes using direct debit or credit cards and shopping online.

It’s also important for your child to understand that spending online or using a direct debit or credit card takes money from their bank account. Checking their account balance regularly can help with this.

If your child wants a debit or credit card, it’s good idea to talk with your child about the pros and cons of having easy access to savings or paying with credit. For example, debit and credit cards are convenient to take with you but it’s harder to keep track of spending. If you overspend, there’s fees and charges that you’ll need to pay. And with credit cards, it’s possible to get into debt and that can affect your credit rating.

Healthy Money Habits, Money and Finances, money management

4 tips to help teens manage money

Posted on April 24, 2022 by Tim Connolly

As high school students prepare to make their grand entrance into the “real world,” one of the many valuable lessons they need to learn is how to manage their money. You may have said to them, “Money doesn’t grow on trees,” but learning how to handle their own finances goes beyond that time-honored saying.

Money management for children is about planning, analyzing and assuming responsibility for one’s finances. Whether your teen is going to attend college in the fall, start their career, travel the world, or simply hasn’t made up their mind about life after high school, an understanding of money beyond the “Bank of Mom and Dad” is important.

According to the Consumer Financial Protection Bureau’s report, Building Blocks to Financial Capabilities, establishing good financial decision-making habits in the teen years helps people better navigate their day-to-day financial lives as adults. They are better able to set goals, control impulses and follow through on financial decisions. Here are four ways to get started:

1. Talk with your teen about wants, needs, and tradeoffs

Tell your teen why you’re spending your money on a college education or on memorable experiences, rather than on stuff. Discuss the difference between wants and needs to help teach them about controlling impulse-buying.

Talk to them about making tradeoffs to help them choose less expensive alternatives. For example, if your teen wants to see a movie, urge them to consider renting it and watching with friends, splitting the cost that way. Page encourages parents to talk with their kids about money decisions so they can learn how to use it as a tool to build wealth.

2. Get them to start budgeting

When it comes to budgeting, Page says the focus should be on cash flow management, or the ability to monitor, analyze and adjust one’s personal budget. That knowledge can help create financial security, even when times get tough.

“Life is not oftentimes as simple as one line after another, it’s more of a rollercoaster,” he says. When you create a budget, Page recommends first picturing what you want your life to look like. It’s sort of like mapping out your life, but through your finances.

Once you begin budgeting, you will be able to track your spending and see where your money is going, and see if it is helping fulfill that initial image. Page says that when you pass this skill on to your teen, they should be able to see how their financial choices impact their dreams and goals.

3. Save, save, save

The more young people save the more cushion they will have. Saving allows them to have money, even when they don’t need it, as opposed to needing it and not having it. Another way to encourage them to save is by discussing financial goal-setting. Just like with any goals, saving can be for the short, middle, or long-term.

4. Talk with teens about credit and credit cards

If your teen hasn’t received a promotional piece of mail from a bank with a credit card offer, they will soon.

Page says that it’s best to talk to kids about credit cards and about the importance of building up a credit score before they have a physical card in their hands. “Building credit is a wealth building strategy,” says Page. Your credit score is essentially how trustworthy financial institutions think you are based on your prior credit experience.

Meaning if they give you money, are you likely to pay it back? It’s how banks decide if they will loan you money and the total amount they’ll give you to spend on your credit card. Often, for young people who have no credit history, a parent or guardian can add them to their credit card to help them build a credit history.

If your teen does decide to open a credit card account, the best way to manage their accounts is to keep their credit card use low. Building good credit involves not using all the money that is available to you on the card. 30 percent is the ideal usage to maintain a high credit score.

So if they have a limit of $200, they should only have $60 worth of charges. Paying the balance in full every month also helps build a stronger credit score, since it shows that you are able to repay the loan.

teaching teens, Teaching Teens About Money

4 Tips for Parents to Teach Their Teens About Money and Budgeting

Posted on April 24, 2022 by Tim Connolly

Teenagers are right on the cusp of major financial responsibility. They may already have their own jobs. Soon, they will be leaving home—and your supervision—to start paying their own bills, managing their money, and attempting to live within a budget.

Here are four ways to teach teens about money and budgeting before they leave the home.

1. Emphasize the ability to save―not the ability to spend.

Financial independence and wealth are often associated with nice homes, luxury cars, exotic vacations, and a high overall standard of living. But when children internalize the merits of spending as a marker of success, it can lead them to aspire to high levels of spending and overlook the value and security of saving.

As a parent, you can help reinforce strong savings habits and spending discretion by demonstrating these preferences in your own money management. Share your savings goals with your children and discuss the security and stability you experience when you have money tucked away and invested for the future.

2. Provide children with a fixed allowance.

Even if your finances allow you to provide your children with money whenever they need it, an allowance is an effective tool to teach work ethic and responsibility. Managing an allowance can also help children learn how to operate with a fixed stream of income.

A set allowance gives your child the opportunity to make hard decisions about how to spend their money. For example, they may have to save up several weeks of their allowance to afford a higher-priced purchase. Tie the allowance to weekly chores or responsibilities, and let your child make their own spending decisions—even if that means learning from their early mistakes.

3. Open a bank account with your child.

As children enter their teenage years, they may have use for a bank account—and this is an excellent opportunity for parents to educate children on proper budgeting and money management.

Go to your local bank and open an account with your child so that you maintain access to their account. Minors as young as 15 years of age can open their own student checking account as long as their parent is on the account as a co-owner.

Task your child with tracking their spending and managing their account balance, as well as performing basic tasks such as cashing checks and making deposits and withdrawals.

Monitor their behaviors and offer guidance to help them improve their money management, avoid unnecessary fees, and take advantage of the many financial tools offered, such as online banking and online bill pay.

4. Consider giving your teen access to a debit or credit card.

The idea of their child having access to plastic may make some parents cringe. However, this can be an excellent opportunity to offer guidance and coaching as your children learn how to manage these cards, as well as their spending.

Educate children on how easy it is to overspend with these cards, and show them the basic steps involved in charging to a debit card or withdrawing from an ATM. This is also a good time to explain how compound interest on credit cards works and how it can dig a deep financial hole if your child isn’t careful.

You can also provide coaching on how to be safe when making purchases online—an unavoidable scenario once your child moves out. Show them how to evaluate the safety of a potential website, for example, including familiarity with the brand and secure checkout options.

Remember: You can set daily spending and withdrawal limits to prevent major charges that would put your child in significant debt.

Teach Kids About Money, teaching kids about money

6 Ways to Teach Financial Literacy to Kids

Posted on April 24, 2022 by Tim Connolly

Here are some great ways to teach kids about money.

1. PLAY GAMES THAT INVOLVE MONEY

One of the best ways to teach a lesson is by doing so without your child even realizing that they are learning. Play games that include a financial element like Monopoly or Life and help them strategize during the game.

This will help your child learn the importance of budgeting and planning for the future, all under the guise of play.

2. MAKE A WISH LIST WITH YOUR CHILD

An essential part of financial literacy is creating a set of priorities. We can’t have everything we want all at once, but we can achieve our goals over time if we plan ahead. This is a great lesson that children can learn.

Sit down with your child and have them list five things they want. Then have them rank them from most important to least important. Once the list is created, strategize with your child about how they can obtain their wishes.

3. TEACH WHILE YOU SHOP

Take your child shopping and actively explain your decision-making process. When you arrive at the store, tell your child how much money you have to spend and what your priorities are.

Show them why you are picking one item over another and explain things like discounts and coupons. Remember, children will learn from your example. Telling them about budgeting is important, but it’s much more impactful if they see you following a budget yourself.

Additionally, give your child small amounts of money to spend themselves. You’ll be surprised at how happy they will be to spend $2 on anything they want! They’ll also learn the importance of spending with a limited budget.

4. GIVE AN ALLOWANCE

Giving an allowance gives children first-hand experience with money. They learn the rewards of careful spending and saving and the risks of making impulsive spending decisions. And those risks are a lot smaller than they will be later in life! Kids also appreciate things that they can buy with their own money.

If you’re wondering how much allowance to give, know there aren’t strict guidelines. Some parents choose to give one dollar for each year of a child’s age. Other parents base their kids’ allowance on work they do around the house — like cleaning, lawn and garden chores, or babysitting younger siblings.

Some parents put their kids in charge of paying for some of their own expenses — like clothing, video games, or tickets to movies — and set the allowance based on that.

Whatever amount you decide on, keep in mind that it will become a regular expense for you to consider in your family budget. Make it work for you and your child.

5. SPLIT MONEY INTO CATEGORIES

Get a piggy bank that splits money into spending, saving, and giving. Teach your child about what each category is and how they are allowed to use the money in each section. Every time you give them their allowance, talk them through how they plan to use their funds.

Place the piggy bank next to your child’s wish list so that their spending and saving goals are clear to them. Also, talk through the charitable causes your child thinks are important, and when they hit a giving goal, donate the money to that cause in your child’s name.

6. INVOLVE YOUR KIDS IN MAJOR PURCHASES

Deciding where to go on vacation? Buying a new appliance? Include your kids in the process and have them help with the research. You can show them the factors that go into making the decision and have them help you compare the options before making the purchase. They’ll feel proud to know they helped with the research to make the best decision for the entire family.

In short, teaching children about finances can be easier than it might seem. It just takes a bit of planning, a little patience, and some creativity. Once your child learns the basics of finances, you can increase their financial responsibilities by upping their allowance and helping them to open a savings and checking account. These lessons will help your child develop a healthy attitude towards money as they grow into adults.

Teach Teens, Teaching Teens About Money

Teenage Money Management Tips

Posted on April 24, 2022 by Tim Connolly

The best way to teach teens about money is for them to learn by example. Talk to them about what things cost and why you can or cannot buy certain things.

Teach Them What Things Cost

Send them to the store to buy things on a list. You can ask them beforehand to think what everything would cost together and then they can see if they guessed correctly or were way off.

Give them insight into the family budget. Show them what your mortgage is, what you pay for insurance, school fees, and what you need for groceries (and savings if possible).

Teach Them How To Save

A great way to teach them how to budget is once they’re earning their own money, to give them several ‘buckets’ to split their earnings into.

They can put some into expenses, some into personal spending, some into savings.

Give Them An Allowance

We’ve always given our children a small but consistent allowance.

They can choose to spend it or save it. In the beginning, they would spend it on silly toys and tuckshop.

Our eldest son wanted to get a tablet, so we said that if he saved up half of the money for it, then we would pay the other half.

It took him 2 years, but he eventually got his tablet.

There were several lessons learned from this:

Our son felt a great sense of achievement and pride in buying his own tablet.
He learned delayed gratification i.e. he couldn’t get it immediately, but really enjoyed the feeling of finally getting it.
Our youngest son noticed that you could buy one really nice thing, and use it a lot, versus buying sweets and toys that you don’t really play with again. He too started saving his allowance to buy something bigger and better later on.

Open A Bank Account For Them

Our son has his own bank account, which is a savings account, but he can withdraw from it when he needs some money.

It’s up to you to decide if they should have a credit card, but we decided that their basic needs are met by us.

They don’t need anything else. Whatever else they want is not a need, so they should rather save up for it than go into debt.

Explain Depreciation

Explain to your teens the difference between a depreciating vs an appreciating asset.

For example, when you buy a new car, as soon as you drive it out of the car dealership, it depreciates in value. As your car gets older, the less valuable it will be in real dollar terms.

In contrast, assets like property are usually considered appreciating because (unless there is a housing crash) the value of your home should go up over time, rather than decrease in value.

Teach Them Why Debt Has Negative Consequences

Debt management is not just about paying back what you’ve loaned, but also trying to avoid debt in the first place.

They should understand how long it took to save up for this and what you had to forego to be able to set this money aside every month.

Make sure they understand that paying back a loan comes with interest. Show them how much more they have to pay the longer they take to pay back a loan.

Final Thoughts

Teaching your teenager how to manage their money is an ongoing discussion.

financial education, Financial freedom, Helpful Tips

Tips to Teach your Kids about Money

Posted on April 24, 2022 by Tim Connolly

I recently did an interview about tips to use when teaching kids about money. In thinking through some techniques, I was able to lock on some specific things we did which helped to better instill good money management habits in our kids. Here they are:

1. When our daughter was in her tweens, we started working with her about purchasing decisions and saving up for things she wanted. Here’s what we did: We increased the amount of her allowance, gave it to her quarterly, but then had her use her budget to buy all of her own clothes and other personal items

– We kept track of inflows and outflows on an excel spreadsheet

– If she wanted something we would ask her if that was where she wanted to spend her budget. If she said yes then she made the purchase but then she had to wait until she had enough money in her account to buy other things

– Right after we put this into effect, she and my wife were in Nordstrom and our daughter saw a pair of flip-flops she wanted. She asked my wife if she could get them. My wife responded, “Is that where you want to spend your money?” She ended up buying flip-flops at Target.

2. Both our kids got checking accounts before age 16 and credit cards at age 18. The rationale for doing is that we wanted to make sure they learned about the concept of interest and making payments versus paying their bill in full every month. We wanted them to learn good habits while at home as opposed to learning bad habits while at college.

While discussing with our daughter, she asked the question, “You mean if I don’t pay it off in full every month then I’m paying interest to the bank and getting nothing in return?” After I told her that was exactly the case she vowed that she would always monitor her spending so she could pay her bill in full every month. Both our kids are experienced with credit cards and neither has paid a dime in interest charges because they couldn’t pay their bill in full every month.

3. Our eldest is out of college and youngest is still in college. When our eldest got her first job as a nurse we had a deliberate discussion about her saving for retirement.

She contributes the maximum amount to her 401k, has saved up enough for six-months of living expenses, and lives off the rest. She drives a ten-year-old car because it’s “good enough”. She still indulges in the nice purse or a weekend away, but does so within her means.

4. Most of the discussion has been about our daughter, but we did the same things with our son. He and his big sister are better disciplined money managers than many adults I know. Oh and our son is also mainstream autistic and still is able to manage his finances like a hawk.

financial education, financial literacy

Teach Your Kids About Money in 4 Steps

Posted on April 24, 2022 by Tim Connolly

There’s no single playbook for what, when, and how to teach kids about money—your circumstances and the child’s personality are part of the equation—but one tactic is universal: “Parents should use milestones in their kids’ lives to sit down and have a conversation,” advises Tim Ranzetta, founder of Next Gen Personal Finance, a nonprofit that provides educators with free resources to teach personal finance.

When your tween lands a babysitting gig, talk about saving. If your 16-year-old is on the verge of getting a driver’s license, discuss insurance. As college decisions come into focus, make tuition, student debt, and career plans front and center. Being a parent it’s your responsibility to focus on teaching kids about money.

Here’s how parents (and grandparents) can set up kids for good money habits:

Early Childhood:
Teaching by Example

Just as children develop language skills by hearing words, they develop ideas about money by listening to, and watching, their parents. “They are little sponges taking in how you make decisions related to money,” says Scott Rick, an associate professor of marketing at the University of Michigan and father of three young kids.

In a recent study, Rick and fellow researchers found that children as young as 5 had distinct emotional responses to spending and saving money, suggesting that people are prewired to be spendthrifts or savers.

This isn’t to say spendthrifts are doomed to making bad decisions or that savers will be misers. “Parents can help kids recognize the emotions around money and help them adjust their behaviors,” Rick says.

Tweens and Early Teens:
Practice Makes Perfect

Young children start to understand the difference between needs and wants, but this takes on real weight when they enter middle school and what they want costs more than a candy bar. Cellphones, soccer fees, and expensive sneakers make money lessons very tangible.

Here’s where the training wheels should come off. Regardless of how great your means are, don’t give your kids carte blanche for routine expenses. Instead, devise a budget and come up with an allowance. When Daniel Wiener’s daughter was a teen, he had her manage most of her discretionary expenses, from birthday gifts to movie tickets.

“We had a Crisco can in my office we called the ‘personal ATM,’ ” says Wiener, chairman of Adviser Investments, a Newton, Mass., wealth management firm. He deposited his daughter’s allowance monthly. She made withdrawals as needed, though she had to meet annual savings and charitable goals, or get a lower allowance the following year.

The jury is still out on whether kids should have to work for their allowance. Some say that the only real way to appreciate the value of a dollar is to earn it; others argue that it’s more important to teach youngsters to be accountable for their spending.

“But the bigger point is that kids need to practice managing their own money, and that often means giving them an allowance,” says Ranzetta.

Experts emphatically agree on two points: First, the allowance should be paid monthly or even quarterly, so that the recipient must make it last. Second, parents should outline clear parameters about what’s covered by the money—and not cave in if it’s spent quickly and the child pleads for more.

Teens to Pre-College:
Holding Them Accountable

This is when life milestones—and related money matters—come in rapid succession. For many teenagers, it starts with getting a driver’s licence, use of a car, or possibly their own vehicle.

“This is an ideal time to introduce the concept of insurance,” Ranzetta says. Premiums and deductibles don’t make for titillating conversation, but if getting the car keys is predicated on understanding them, kids will listen.

College and Early Career:
Preparing to Launch

Decisions made during this stretch can have lasting financial implications, whether related to student debt, career prospects, parents’ financial goals, or all of the above.

College money conversations should include costs, budgeting, and the desired outcome. Assuming your child has managed money in high school, the financial transition might not be too jarring in the freshman and sophomore years, thanks to student housing and campus meal plans.

Upperclassmen often move off campus—or have internships that require living on their own—and that opens doors for conversations about rent and utilities, budgeting for food, and earning money.