Financial literacy for kids
Recently, I was walking my 6-year-old into school when I noticed a wad of cash sticking out of her backpack. I asked where the money came from and why she was taking it to school. She admitted that the cash ($36 in all) came from the jar where she stashes all her birthday money and that she and a friend had planned to “trade” their money at school that day. I explained that it’s not appropriate to trade money at school, and we needed to take it home and put it back in the jar. That day I decided that it was time to start actively educating her about money.
I reached out to Chris Carlstrom, a banker with United Community Bank, for some advice. Carlstom conducts financial literacy outreach programs in schools and community groups in the Springfield area and is a parent himself. His take: it’s never too soon to start talking to your kids about money.
“As soon as they begin to understand basic math, they’re ready to understand money and that the things they want cost money. It can be as simple as talking to your kids about how much things cost while you’re at the grocery store … You can show them that the stuff we need and want has a value.”
Kids can open a joint savings account with a parent or guardian at most banks, and some banks offer incentive programs to reward kids for good grades. UCB has a program which deposits a dollar for each ‘A’ that a child receives in school in a quarter.
In addition to opening a savings account with your child, Carlstrom told me that parental modeling and inclusion in financial discussions are key to raising money-savvy kids. Here are some of his tips for success:
Teach that money is earned through work.
“I think that’s the whole idea behind ‘take your child to work day’ -- to help kids understand that money is earned in exchange for work and time,” Carlstrom told me. A chore chart can help kids equate value for work and get you some extra help around the house. We use one in my home outlining everyday household responsibilities that my daughter is expected to do without compensation (make her bed, put away laundry, feed the cat, etc.), as well as extra chores with a pre-assigned monetary value. For example, she can earn $1 for wiping down the baseboards or $3 for washing windows. She keeps track of her work on the chart, and we pay her each week for what she’s completed.
Spend less, save more.
“People always want to know how to make more money, but often the key is spending less, not just making more,” Carlstrom remarked. “You have to treat savings like a bill, and it’s up to parents to demonstrate that in their own lives. Just having the knowledge isn’t enough; you have to put it into practice.” Parents should also be open with kids about their financial mistakes and include their kids in creating a family financial plan.
Instead of just spending all of the money they earned raking leaves, encourage kids to separate it into three categories: money to spend for a treat, money to save for something special they want to buy and money to set aside for long-term saving. Introduce your child to experience the joy of saving up for something they really want and paying for it themselves.
Above all, be honest about setbacks and celebrate achievements together. It’s not always fun to delay immediate gratification and save for tomorrow, but practicing these skills now with your young children will set them up for a responsible and prosperous future.