Financial Education – Invest in Your Child’s Future

Financial education can be defined as: establishing a working knowledge of how money, credit, and debt work, and should be managed, in order to make responsible financial decisions. Improving your financial know-how leads to being able to manage money responsibly, to use income to pay bills now, to save for the future, to avoid debt, and to make informed decisions around how money affects your day-to-day life, and your future.

Basically, financial education can never begin too early. Instilling healthy financial habits in children sets them up for a secure and successful adulthood. Teaching kids the difference between wants and needs is a foundational lesson they can learn early on, and it will serve them well as they grow and build lives of their own.

How to teach preschoolers and kindergartners about money

Generally, once a child is old enough to count, they are ready to start learning about money. Here are some straightforward ways to demonstrate the value of money and how to use it.

1. Use a clear jar for saving coins and dollar bills. Literally watching their money grow is powerful, and even fun. Make a big deal out of it as their savings jar fills up, and celebrate once it reaches the top!
2. Set an example with your own attitude. Money habits in children are formed between the ages of 6-12, so even very young children will notice when parents are calm and in control when spending. If it’s viewed as a source of conflict, they learn that money management can be difficult and stressful.
3. Show them that things cost money. Let them experience how money works. For example, they might take some money from their jar, go to the store, and hand it to the cashier in exchange for their purchase.

How to teach elementary and middle school students about money

Elementary school children and tweens are prime candidates for hands-on experiences with money. By this age, they usually have a base understanding of how money works and what it’s used for – living, spending, and saving.

1. Show them that spending on one thing means not spending on another. If they buy that video game, they won’t have money to buy stylish sneakers – have them compare the cost of one item they want to another. It’s all about weighing decisions and understanding outcomes.
2. An allowance is payment for services rendered. They must accept that money given for regularly doing chores around the house is payment, not simply generosity. And no advances! Saving up their allowance teaches the rewards of patience.

How to teach teenagers about money

From 13 on up, teens should have a strong understanding of the basics around money. They are ready to learn about financial responsibility, and how to save or invest their money now for rewards that will come later.

1. Start a savings account. Instill that even a small percentage – 10%, perhaps – of every dollar earned through allowance or a part-time job goes into their savings account. Check out Kansas City Credit Union savings account options.
2. Think about financing college. College is expensive! Student loans are a viable option, but should be taken out sparingly and paid back quickly. Attending a community college or a trade school for a few years, and then transferring to a four-year program, can be just as rewarding as attending a traditional four-year institution. And, it can save them money!
3. Teach them about credit cards. Freshly minted 18-year-olds are deluged with credit card offers, especially in college. Presumably, they have a source for paying credit card debt – savings, or a part-time job – but an 18-year-old “adult” should know that credit is to be used sparingly, and paid back promptly.
4. Set up a budget. Teens can learn how to budget their income, no matter how much, or little, they make. There are many simple budgeting apps that assist in teaching budgeting. Work with your teen to find the right app or method, and get them set up.
5. Demonstrate the magic of compound growth. Help your teenagers invest! There are numerous apps for funneling money into investment accounts. Acorns, for instance, rounds every purchase up to the next dollar and deposits the difference into an investment account. Since the money is taken out in such small increments it all but goes unnoticed, and checking the investment balance from time to time is always a pleasant surprise.

Financial education begins early and at home

Early learning through simple, and even fun, habits create a healthy attitude towards money, and parents who demonstrate that healthy attitude are just as crucial. Learning the trade-offs involved in spending decisions, and saving for the future, becomes an easily understood tangible instead of a confusing tangle.

Again, financial education is critical throughout a person’s entire life. It’s not just understanding numbers; it’s about instilling responsible financial behaviors and attitudes that shape a secure and successful future. Starting this education at home, and early, creates a solid foundation for a financial life lived with wisdom and confidence.