Sponsored by T. Rowe Price
One of the earliest experiences that shaped my relationship with money was reported to ChexSystems at age 18. Yes, I, Athena Valentine, national personal finance columnist extraordinaire, was reported to ChexSystems. Small-town living is excellent for some; it’s not so great for others. You can guess what category my family fell in. My parents were famous for bouncing checks, and as a result, they had to pay for everything in cash. Whatever they couldn’t pay for in cash, they paid by Western Union and money orders from the local convenience store. Everything came to a tipping point when my mom died at age 38.
I now know that my parents were trying their hardest. Still, unfortunately, the chaos that surrendered their money habits, and life, was passed down to me. As a post-secondary educator, I share my story to everyone I can as an example that your demographics do not determine your destiny. I also share my story because it’s essential for kids to be money savvy at any age. So, how do we set up the next generation for success?
Open Communication
One of the ways you can gain instant street cred with your kid, or the kids you work with, is, to be honest. T. Rowe Price has published a study about current financial trends within families. And it shows that many families have been affected by the COVID-19 Pandemic. At the time of this writing, we are still in an economic flux due to various factors created by the pandemic itself. Some families have experienced a loss in income, and some have had careers that no longer exist.
While you don’t want your children to feel like an additional burden, you want to communicate with them about any financial hardships you may be undergoing. Kids are more perceptive than we realize and will quickly notice if you’re home more often or if their schedule changes. Call a family meeting to let your child know that your job is no longer the best fit, so you are looking for a better one. Reassure them that they will be okay, but in the meantime, they may see you working from home or spending additional time with them. You can also set boundaries about spending money on extra items from the grocery store or extracurricular activities.
Education Is Key
Finding ways to break down financial concepts that your children can understand doesn’t have to be complicated. When explaining a new financial concept, give them time to process the information and then an opportunity to demonstrate understanding.
For example, when you introduce the idea of earning an income, allow them an opportunity to make money by introducing chores or setting them up with a side hustle like babysitting. By earning an actual amount of money, they can now see in front of them their hard work. You can do the same thing for teaching other money concepts by using the free program Money Confident Kids.
It’s Never Too Early To Introduce Budgeting
Budgeting is a key money skill that kids of all ages can learn. Even adults can freeze up at the word budgeting but the earlier you introduce it to your kids, the earlier they’ll be a money savvy!
Grab a poster board (from the dollar store of course) and make a chart with three columns. At the top of the first column write “+ Income,” the second column “- Expenses” and the last column “ = Balance.” Income can include any type of money your child receives such as allowance, gifts, or money from doing side hustles around the neighborhood. Your child might not have any expenses (yet!) but you could easily put something they like, such as credits towards a video game they play or random toy purchases.
Have them take the money from the amount of money they have in the Expense column and subtract it from their Income column. They can then write their remaining amount in their Balance column. That’s it! They’ve learned a budget, now it’s up to them to decide what to do with it.
Or Learn About Goal Setting
Setting goals can help children stay focused, find their purpose, and be proactive in the lives they want to live. It can also help them save up for a future they dream about. Goal setting should be SMART (Specific, Measurable, Achievable, Realistic, and Timely).
I always like to refer to goal setting as a roadmap when I’m doing a presentation in the classroom. I could jump into my car, and start driving to my destination. I might get there if I followed signs but I could also get lost or stuck somewhere. On the other hand, if I took the time to put my destination into my phone’s GPS, I would get step-by-step directions on how to get there. I would also get a list of gas stations and restaurants!
Have your child set a SMART goal when it comes to their spending. Ask your child to pick something specific they would like to buy and then help them decide if they could measure their progress on the way to achieving their goal. If they can, help them figure out a realistic timeline so they can save without burning out.
For example, if your child is a space fan, they might be interested in saving up to purchase a block building set. Building sets are not cheap and one of the lower models can cost $100+. Have your child look at their Balance column from their poster board project to see how much they can realistically save per week. If the number on the board looks a little daunting or the timeline seems too far, have them see how they can increase their balance by either cutting back on their expenses or by earning more money.
In Closing
Raising your children to be money savvy doesn’t have to be complicated. With the proper tools and family involvement, your kids can head into adulthood with money confidence.
- This paid testimonial is no guarantee of future performance or success and may not represent the experience of other customers.
