7 Steps to teach your child about money
Building financial capability: 7 steps to teach your child about money
- Discuss the fundamentals – Once kids understand the idea of money, introduce them to basic concepts about how to use money wisely. The Hands on Banking program offers money management education designed for students from 4th grade through college.
- Encourage them to recognize needs vs. wants — and make tradeoffs – Kids need to understand that people can’t have everything they want. They need to identify their priorities and make tradeoffs.
- Encourage goal setting – Ask your kid to list all of the things they want, and to organize their list into immediate, short-term, and long-term goals. This will help them learn about making choices and trade-offs, setting priorities and distinguishing between needs and wants. Help your kids to set goals and teach them the habit of saving regularly to reach their goals. As an added incentive, consider offering to match what they save on their own.
- Make money grow – Explain the concept of earning interest and the power of compound interest to make money grow faster.
- Be a smart shopper – Encourage kids to comparison shop, ask questions, and think through a purchase before they buy.
- Keep good records – Teach kids to save receipts. This will allow them to keep track of what they buy and how much they spend, and to return purchases if necessary.
- When it comes to spending, let kids decide how to use the remaining money, but encourage them to track what they spend. Without tracking, their money can quickly disappear unnoticed. Explain that since people can’t afford to buy everything they want, they always need to make spending choices and trade-offs.