“We think the involvement of the child is pretty important when teaching them about finances. This allows them to start to understand the value behind what their parents are giving them and how the whole system works.”
Every parent hopes that their child will be financially responsible, but how do we teach this essential life skill? Financial advisors Mike Callahan and Eric Sachetta discuss ways to educate children about money matters.
Financial education is one of the most lacking parts of a child’s time in school. But, if parents start teaching financial responsibility to children when they’re young, they can be better prepared to manage their money as they enter adulthood. Parents can plan for teachable moments by learning about and incorporating some fun tactics.
As an example of one way to teach kids about saving money, have kids do chores and give them some cash along with different envelopes for ‘saving’ and ‘spending’. After saving up some money, children can come to the store with you and pick out a toy within the budget of their ‘spending’ envelope. Donating toys to charity with your children is another way to teach them that items have value. Kids can learn how to ‘stretch a dollar’ at the store when comparing the name-brand candy to the larger and cheaper store-brand options. A lemonade stand is a classic way to teach young children how money, transactions, and businesses work.
In time, opening a savings account and credit cards for older kids, around the age of 18, is one way to improve their financial literacy and understanding of interest. You might even want to open a Roth IRA with a little money in it when your kids turn 18. Some parents add their older children as authorized users on credit cards so that they can start building their credit score. To help them learn about investments, bring your kids along to meetings with your financial advisor and encourage them to ask questions!
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Teaching your kids financial responsibility can help get their financial journey off to a strong start. At Sachetta Callahan, we care about financial education and encourage you to bring your kids to your appointment with one of our financial advisors. Contact us today.