One of the most valuable gifts you can give a child is a working knowledge of money and access to a savings account. In fact, children with as a little as $500 in savings are three times more likely to enroll in college and four times more likely to attend. Source: Assets and Education Initiative (2013). Understanding basic personal finance from a young age could encourage money habits that lay the foundation for a solid financial future. Parents are in a unique position to teach their little ones smart money-management skills. Unlike financial literacy classroom instruction, parents can provide real-life money lessons that stick. But, it's hard to know where to start.
Use these tips to help kick-start the first of many money lessons in your household.
Point out price tags.
Help your child read sticker prices before adding items to your grocery cart. Little ones can learn that different products cost different amounts. It can also create an opportunity to compare prices for similar goods.
Pay with cash.
While it's often more convenient to use a debit or credit card, paying with cash allows your child to see the physical exchange of cash for goods and recognize that items cost real money.
Encourage a savings goal.
Kids who set their own savings goals are more likely to achieve them, stay motivated, and understand the importance of saving for purchases. For younger children, ensure the goal is one they can complete within a short timeframe. For example, saving $5 in 30 days is more reasonable than setting a goal of saving $500 in 6 months.
Gift them a clear savings jar.
Saving for the future should be fun and visual. A clear jar or piggy bank can help your child see that each coin or paper bill added to the container means their savings is growing. Match their contributions to help fill it even faster. Empty a full jar into a savings account where it can earn interest.
Let them work for pay.
Kids don't need a regular after-school job to earn money. They can perform odd jobs around the house or work for others during school breaks. For example, spring break could provide opportunities to earn cash doing yard work. During winter break, they could pet sit for a vacationing neighbor. Business-minded teens can make money year-round by buying and selling used goods online at a profit.
Introduce them to budgeting.
When your child reaches their teen years, kick their financial education up a notch. Help them create a budget based on their earnings or cash gifts and expenses.
Equipping kids with smart money skills takes time, patience, and hands-on practice. Don't forget to reinforce your lessons by letting them manage their finances with a Youth Savings or Checking Account
. As an adult custodian or joint owner of the account, you can monitor their activity and let them experience the natural consequences of their financial decisions. Open an account today by calling our Member Contact Center at 1-888-786-2791.