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Teaching Your Child the Basics of Financial Literacy

kid smiling with piggy bank
April 20 2018 • by Deirdre Jannerelli • Money Management, Saving

There’s no doubt that it’s important for kids to learn their ABC’s and 123’s, but just as important is teaching them financial literacy. Too many children grow up not knowing how to balance a bank account or manage a budget.

Since there’s no guarantee that children are being taught financial basics in school, it’s a good idea to instill this knowledge in them at home. And when should you start teaching these lessons? The sooner the better. Here are some age-appropriate activities you can share with your child:

Pick out a piggy bank. Believe it or not, kids as young as 3 years old can grasp the concept of saving. And a piggy bank is a perfect savings vehicle for them to become familiar with. These days, piggy banks come in all shapes and sizes, so it’s just a matter of picking one that appeals to your child. If you’re feeling especially creative, you can make a piggy bank out of household items such as empty bottles, boxes, or cans.

Count some coins. If your child is too young to understand the difference between dimes and quarters and dollars, start off simple. Introducing them to pennies, and letting them practice counting them up is a great way to kick off their financial education. Explain to them that the coins they’re playing with can be used to buy things, like toys and books.

Take them shopping. Once your child has a basic understanding of what money and saving is all about, it’s time to take them out into the real world. Using their own money, have them join you on a trip to the grocery store. Tell them they can pick out a couple of items that you know they can afford, then have them pay for the items themselves at the checkout line. This will not only give them a sense of accomplishment, but they’ll also quickly discover that what they eat and drink actually costs money. And, if your child picks out something that they don’t have enough money to buy, you can explain to them that they’ll need to save more money in order to purchase it. This can help teach them patience, and the value of a dollar, and will hopefully be the first step in helping them to avoid “impulse buying” in their later years.

Let them earn their own money. The idea of doing chores around the house in exchange for cash will likely get the attention of older children. And paying your child for doing housework will also give you an opportunity to stress the importance of saving at least of portion of what they earn. Learning to save their money, rather than blow it all at once on frivolous items, is a valuable financial lesson.

Open a children’s savings account. Speaking of saving, helping your child to open a savings account of their own can be a great way to teach good savings habits. By regularly taking trips to the bank to deposit their own money, and watching their account balance grow over time, your child will establish a routine of responsible money management. At BankFive, we offer The Nickels Savings Account for Kids for this very purpose. Available to children 12 and under, this account encourages deposits of any amount, and interest is earned on balances of $10 or more.

Introduce your teen to a checking account. By the time they reach their teenage years, your child should be ready to grasp more complex financial concepts such as balancing a bank account, budgeting their money, and paying bills online. By having their own checking account, they can obtain hands-on experience with things like ATM withdrawals, debit card purchases, mobile check deposits, and more. Of course, as is the case with children’s savings accounts, a parent or guardian will have to act as a co-owner on the account if the child is under the age of 18. Many banks - like BankFive - offer Student Checking Accounts geared toward high-school and college students, which can be a great tool for introducing young adults to solid financial habits.

By taking some time now to teach your child about financial concepts like saving, budgeting, and money management, you’ll be helping them to lay a strong financial foundation. And, you’ll be putting them on the right track for achieving their future financial goals!