Having good money management skills is a vital skill, and we can all agree it's important to start young so they develop good habits early on. Despite financial literacy efforts, one study found that other developed countries fare far better than Americans when it comes to knowledge about basic money skills. How can you start teaching money skills at home to give your kids the head start they deserve? We've got a few ideas to help you get started.
Why is Financial Literacy Important for Kids
It's no secret that having good money habits sets you up for success, but a lesser-known fact is that it's vital to start those habits early. Young adults and teens who have not begun to learn about money management but need to make major purchases (like buying a car or taking out student loans) are at high risk of making decisions that can affect them negatively for the rest of their lives. Learning early can help them make better decisions and lead to a happier and more productive life. They will also be better prepared to make good financial decisions, better navigate unavoidable emergencies, and take advantage of compound interest so they can save for their future.
10 Ideas to Teach Your Child Financial Literacy
Use a three-category savings strategy
Encourage your kids to do more than just save their allowance. Help them divide it into three groups, in separate jars or in one account and track balances on a piece of paper:
- For their future and emergencies (for now, that might be a flat tire on their bike)
- Spending for wants like toys or a video game
- Donate to charity
Open a savings account
Take a trip to the bank and help your children open their first savings account. This will give them the opportunity to see how banking works, why having money doesn't always mean a stack of physical cash, and the importance of earning interest. WaFd Bank's Youth Savings account has no minimum or monthly balance fee for minors and requires only $10 to open and earn interest. Contact your local branch to open yours.
Think of the classics like Monopoly or Life, or if they're a bit younger use pretend play to introduce earning, saving, and spending concepts at a make believe store or restraint and pay for services like a check up for their stuffed animals and other toys.
Turn a grocery store visit into a lesson
There's nothing like hands-on experience! Let your helping hands know how much money you have to spend on groceries and share your itemized list with them. Ask your kids to help you total up the cost of the items as you place them in your cart.
Demonstrate the power of coupons and sales
Bring a couple coupons with you to the store or check sale tags on the shelves and show how percentages and buy one-get-one's can help you save.
Comparison shop together
In need of a new dishwasher, washing machine, dining room set or other big purchase? Make your kids part of the process! Let them know what you're looking for, talk through the importance of shopping around, and ask them to help you search. Even regular grocery shopping can be a lesson in comparison shopping. You can compare price tags between similar products like name brand or generic.
Work, work, work
If your kids are too young to work outside the house, then pay them to do some jobs at home. This will help to enforce the idea of how money is earned.
Set a budget together
This doesn't have to be anything complicated—maybe they earn $5 a week for their allowance. What can they budget for themselves to spend every week and what will they set aside to save up for something bigger? You can also go over your own household budget when you get paid so they can get a real life lesson in money management (if you're working on setting up a budget for yourself, check out our article on Getting Your Finances on Track). This is a great learning opportunity for the older kids in your life!
Track your spending
Not only can this be a good lesson for your kids, it can help you see where you might be able to cut back if you're trying to save more. WaFd Bank's mobile app helps you do this automatically by categorizing your transactions so you can easily see exactly where your money is going. Teach your kids to use this free tool to help them keep an eye on their own spending when the time comes for them to have their own accounts.
Save at School
Our Save at School program helps elementary school students learn the habit of thrift by making modest but regular deposits during our on-site “bank days.” We also match each initial $5 opening deposit! Check with your school to see if they participate, and feel free to email us at firstname.lastname@example.org to ask about launching a Save at School program in your area.
WaFd Bank is Here to Help
No question is too small, and with WaFd Bank you also have access to tools and services to help you manage your finances and get the most from your money, like Greenlight. You'll get Greenlight for free with your accounts at WaFd Bank, which helps to empower parents to raise financially smart kids. They can manage their own money with the debit card that comes with Greenlight when you sign up while staying safe and connected to family, plus parents can send funds, set flexible controls, and more. Visit us at your neighborhood branch, give us a call at 800-324-9375, or check out our kid and teen savings accounts.
$10 initial deposit required to open account.