It’s never too early to start teaching children about money management. The American Bankers Association (ABA) provides a good rule of thumb: “If they are old enough to ask for a toy or a bike, they are old enough to start learning financial lessons that will last a lifetime.”
The best financial lessons are part of everyday experiences. Look for opportunities to talk about money, read books aloud and play games that center around spending money wisely. Be open and honest when you discuss your financial experiences—good or bad. The ABA offers the following examples of teachable moments to help you get started:
- At the bank: When you go to the bank, bring your children with you and show them how transactions work. Get the manager to explain how the bank operates, how money generates interest and how an ATM works.
- On payday: Discuss how your paycheck is budgeted to pay for housing, food and clothing, and how a portion is saved for future expenses such as college tuition and retirement.
- At the store: It’s easy to give clear examples of “needs” and “wants” using different kinds of foods at a grocery store. Milk (for strong bones) is a need; soft drinks are a want. Explain the benefits of comparison shopping, coupons and store brands.
- Chores and allowances: Assign chores and give them a monetary value. Discuss ways to budget and divide allowances. Encourage children to set a financial goal, such as saving for a bike, and figure out how to achieve it.
- Paying bills: Explain the many ways that bills can be paid: over the phone, by check, with an electronic check or online check draft. Discuss how each method takes money out of your bank account. Be sure to cover late penalties, emphasizing the importance of paying bills on time.
- Using credit cards: Explain that credit cards are a loan and need to be repaid. Share how each month a credit card statement comes in the mail with a bill. Go over the features of different types of cards, such as ATM, debit and credit cards.
- Browsing the Internet: While online, explain to your children the value of their personal information and privacy. Discuss the dangers of online predators and explain the risks and benefits of sharing certain information. Then, as a family, make a list of rules for keeping personal information safe online.
- Planning a vacation: Whether you are planning an outing to a local amusement park or a once-in-a-lifetime trip, emphasize the value of saving as a family.Set a family savings goal that involves your children. Figure out the cost and discuss ways everyone can help to reach the goal.
Remember to always encourage your children to ask questions about money. If you don’t know the answer, research it together or ask your banker.