5 Ways To Raise Financially Savvy Kids

Money may seem like a challenging topic to discuss with your children (especially when
they are little) but it’s important to start having money conversations as soon as
possible. There’s no better place to start than at home!
The best part is, when you first start teaching kids about money, it doesn’t have to feel
like a lecture. It can be experiential, fun, and as engaging as you make it. Your goal is to
help them develop the kind of healthy spending habits that will turn them into grown-up
savers and investors you’ll be proud of.


Let Toys Lead The Way


The experience of buying a toy can be a great way to teach children about money,
explains Noah Damsky, Principal at Marina Wealth Advisors. When you and your child
are in a store together and they ask for a toy, you can explain that they’ll need to save
their money in order to purchase that item, and that hard work will be necessary in order
to make it happen. Then, you can give them a job or chore they can do to earn money
to put towards their goal.


It’s important for your children to understand early on that it’s okay — and necessary —
to wait to purchase something they want. Everyone in the family needs to save up for
their goals. You can illustrate this by explaining to them how you save to buy things you
want, too. “I would teach these things in everyday life rather than in a formal setting,”
Damsky says. “These values can be shared while shopping for groceries, or even when
buying things online.”


Save & Budget


By the time your child is in elementary school and learning more about how much things
cost and the concepts of working and saving, you can help your kids open a savings
account at your credit union. And by middle school, says Jeannine Glista, executive
producer at Biz Kid$, children should be able to set and achieve financial goals like
saving for something specific.


“Once kids see their accounts growing, it becomes a self-fulfilling prophecy — they feel
confident about their ability to accumulate money so they become motivated to get
more,” she says. “This translates to having more self-esteem in their own ability to grow
their savings.”


It’s also important to teach them the “pay yourself first” rule of personal finance so they
know what it takes to gain security and to be self-reliant. When your child gets an
allowance, earns a first paycheck or finds $10 in a coat pocket, their first order of
business should be to stash away a portion in savings. (But it’s up to you, mom and
dad, to make that happen!) While older children can save money in their credit union
account, younger children could put their money in a piggy bank as a visual reminder for
saving part of the cash and coins they receive.


And as your children mature, make sure they learn about the life-saving properties of
having an emergency fund to fall back on. You can do this by sharing a situation where
having a little cash on hand saved you from disaster. A youngster’s “emergency” can
be, for example, not having enough money to pitch in for a friend’s birthday gift. For
more expert tips to help your tweens and teens navigate their finances like a pro, check
out the illustrated book “How to Money: Your Ultimate Visual Guide to the Basics of
Finance,”
which dives into spending, saving, investing, and how to grow into a
money-savvy adult.


Model Good Behavior


Teaching children about the importance of saving at an early age allows them to
develop good saving habits and grow into financially healthy adults. You want them to
have a positive relationship with money. Part of that is how you explain it to them, and
the other part is the behaviors that you model. Your child is watching everything that you
do. Practicing good financial habits, having an open dialogue with your children about
money, and identifying “teachable moments” are all vital to cultivating a strong financial
education for your children.


As they get older and start thinking about college or a job of their own, it’s a good idea
to talk to them about your investments into funds like 401(k)s, IRAs, and other
retirement savings plans. This is an excellent way to show your kiddos the magic of
compound interest.
The magic is really due to time (which they have plenty of) and
patience (which can absolutely be learned). Also, once your child is earning an income
with their first real paycheck, you can help them open their very own IRA at your credit
union, and get them on a path to saving for the future.


Give Real-Life Examples


As we strive to talk more openly about money at every level with our children, it’s crucial
to explain the “why” behind family money decisions when appropriate. Don’t make your
own financial uncertainties become the reason that money is a taboo topic in your
household. All of us learn by example, and we learn even more when others share the
mistakes they’ve made. (If you’re in need of a little guidance on how to best set up your
own budget, check out the Finance Fixx small group coaching program for some
hands-on work with your very own money coach.)


Why it’s Worth it


Ultimately, teaching your kids about money management extends well beyond just
turning them into grown-ups who know how to save and invest their paychecks. It can
help build your child’s confidence in a major way, Glista says.
“Saving money is crucial to a kid’s confidence because it’s a skill they can master at an
early age,” she explains. “They don’t have to