Parents will spend hours teaching young kids their ABCs and 123s. Shouldn’t they also be teaching about nickels, dimes and quarters?
In 2020, a Council for Economic Education survey reported that just 40% of the nation’s high schools include a personal finance requirement to graduate. In addition, a study funded by the National Endowment for Financial Education found that states which include personal finance education as part of their high school graduation requirements influence students to make more informed decisions about how to pay for college.
There is no reason to wait for required coursework at the high school level to begin teaching your kids about money. In fact, there is no reason to wait for the tween years. Financial education should begin at home, with you.
Start ‘Em Young
“As soon as you have a kid that can count, it’s a great time to teach them about money,” said Tanya Van Court, founder and CEO of Goalsetter, a family-friendly goalsetting app and tween/teen debit card that uses quizzes, gamification and fun activities to teach families about financial literacy and goalsetting.
Van Court, who is also a mother of three, said that by teaching kids that the toy they want is $4 and they only have $2, then explaining how they’ll need to save to get the desired item, you’re promoting four key concepts.
First, when they understand they’ll need two more dollars in addition to the two they already have, kids learn the concept of saving. Second, the concept of earning is introduced, as the first question they’ll ask you is, “How do I get those two dollars?”
Next, they’ll experience delayed gratification. As they earn the money, they’ll continue to save for their targeted amount, leading to the last concept of being goal-oriented.
Do the Hustle
“Kids should have some amount of money per week to manage on their own,” Van Court said, “Otherwise, they’re not getting the sense of the value of the dollar.”
There are a few philosophies on allowances. Some families give their child a weekly amount without associating it with chores. It is simply given to help the child understand budgeting and monetary value.
Others attach chores toward collecting an allowance. Do your assigned chores, receive your pay.
Van Court suggests a third avenue that can teach the value of hard work. “Every kid should have the opportunity to earn more money in the household by doing more,” she said.
The “demonstrate the hustle” attitude teaches your child that you get what you earn. List out several tasks with dollar amounts attached to them. If they do two tasks, they get the amount for completing two tasks. If they do none, they receive nothing and if they do all of them, they get all of it.
The most entrepreneurial kids may then venture into the neighborhood, to mowing lawns, walking dogs, babysitting or other side gigs.
Spend, Save, Share
Your child’s piggy bank doesn’t have to look like a piggy. Many financial experts, including Liz Frazier, author of “Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance (and They’re Never Too Young),” recommend the Spend-Save-Share method. Instead of having your child deposit all their hard cash into one container, find three jars and label them Spend, Save and Share. Their dollars should then be split between the three jars.
The Spend jar is for daily expenses such as a trip to Target. This is the answer to the “Can I get this?” question that undoubtedly will be asked.
The Save jar supports their goals in purchasing something in the future like a more expensive toy. The Share jar is intended to help others, whether it is to donate to a charity or spend on gifts for others.
Frazier also recommends using clear jars so that they can physically see their money grow, as visualization can be a big motivating factor.
Tween/Teen Debit Cards
Cold hard cash may work for the younger set, but as kids grow older and have more autonomy, a teen debit card can be more convenient. Cards are connected to your bank accounts and you can automate deposits based on your specified criteria.
Goalsetter’s Cashola Card has parental controls attached to it, and an option to earn more by answering financial literacy quizzes. Greenlight and FamZoo are other popular examples of teen debit cards. Your teen will quickly learn about budgeting and tracking what they spend. Be sure to read the fine print to understand monthly subscriptions or other fees.
You may be out of luck if the card is lost or stolen, as debit cards have fewer protections than a credit card, so these are best for kids who have a record of not losing things.
Family Values
There will be times when finances are tight, and while it’s not necessary to create anxiety with your kids, it is still OK for them to understand that when you are making a decision about buying something, you are making a choice between something you want and something you need.
This ultimately comes down to showing them what your family values.
Letting them know what’s important for the family, such as saving for a college fund, having emergency savings, tithing or other priorities can help them make better financial decisions as they grow into adulthood.
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