Financial literacy is one of the most important lessons you can teach your children to make them successful in adulthood. Teach them the basics early, and build on these lessons as your children grow up.
Young Children, 2-7 Years Old
Some experts suggest teaching children about money when they show interest or begin asking for things while shopping. Young children learn best by modeling their parents’ behavior and by playing games.
Here are some goals you can work through:
- Recognizing money: Your child needs to be able to identify different coins and bills and their value.
- Making correct change: Teach your child how to add and subtract money.
- Saving for a goal: Help your child save some allowance money for a purchase goal. Make the goal something specific that can be reached quickly.
Elementary Children, 8-12 Years Old
Older children start to have a better concept of money. Teach your child about earning money, managing money and where money comes from. Allowance helps children practice these skills. Make sure they know what they need to pay for and how much goes to the bank. Ensure your children want to budget and save money on their own so they’ll continue the practice into adulthood.
- Banking: Open a bank account for your child, and deposit money for savings together. Consider matching your child’s savings contribution.
- Interest: Review bank statements together to learn about interest. Discuss different types of interest.
- Budgeting: Teach your child the difference between needs and wants, and help him or her allocate allowance money into categories. Also, discuss delayed gratification and making tradeoffs.
- Smart shopping: Teach children about comparison shopping, unit prices, coupons, generic goods and the tie between value and price.
Teenagers, 13-19 Years Old
As a teenager, your child is ready to learn about more complex aspects of finances to prepare for adulthood. If you’re responsible with money and model that behavior to your children, they will likely follow suit. Open communication and education are key to ensuring that your children grow up financially literate.
- Checking: Get your teen his or her own checking account before college and teach skills like writing checks, balancing a checkbook and avoiding overdrawing.
- Getting a job: Teens will better understand what their money is worth when they’re earning it. Consider increasing the expenses your child covers once he or she has a job in order to teach budgeting.
- Taxes: A first job provides experience with income taxes. Help your child file a tax return as a teaching opportunity about taxes.
- Investing: Low interest accruing on a savings account provides an opportunity to talk about investing together. You can open an investment account for your child, teach your child about the stock market, and introduce diversifying.
- Credit: You can get your teen a credit card with a very low credit limit or create an account in your name. Your teen will get to practice using a credit card, but you can still monitor. Teach your teen about paying off balance and credit debt.
To learn more about NOVA Capital Advisors, email Amal Gawle at [email protected], or call 917-225-6932.