Teaching Your Children the ABCs of Finance
Children are our future—now more than ever. Even though millennials are poised to outnumber baby boomers in 2019, the next generation—known as generation alpha—is anticipated to be the largest one yet. In fact, the generation alpha population is expected to reach 2 billion by 2025. As the future leaders of the world, it’s vital that they learn the skills necessary to successfully navigate it—for their benefit (and ours).
If there’s one integral life skill younger generations need the most help with, it’s financial literacy. More than half of the states in the U.S. don’t require high school economics classes and only 17 states require students to take a personal finance class, even though 71 percent of teens believe finance classes should be mandatory. But there is one person who can provide that financial education and help your child form successful money habits now: you. Here’s how:
- Lead by Example
If you can’t resist big splurges or don’t have a rainy-day fund, how can you expect your child to? No matter how much advice you share with them, they’ll learn the most by watching your financial habits—make them good ones.
- Make It Clear
Younger children are visual creatures and most can’t discern the difference between actual value and just a number on a screen. So, in the beginning, put money they’ve earned on their own in a clear container where they can monitor it as it—and their desire to save—grows.
- Bank on Them
Once your child outgrows the necessity of visual money, open a separate bank account dedicated to their money. An account like FCB Texas’ First Savings is a great starting point to show them how they can be rewarded for saving by earning interest.
- Let Them Pay
Obviously, your child is not expected to be financially independent, but you have to instill in them the concept of cost. The next time they want a small-ticket item, like candy or an inexpensive toy, tell them they need to pay for it with their own money and see how quickly they begin to value their dollars.
- Teach Them How to Budget
Help them realize the importance of budgeting their money wisely before they go out on their own. Take the time to review their savings account register with them – or review their transactions via online or mobile banking! You can even share tips you use when budgeting for the family!
- Give Them a “Plastics Primer”
Before credit card offers start flooding your teen’s inbox or feed, it’s important they understand their advantages—and potential disadvantages—and why paying only the minimum amount can add up. Having an open and educational conversation with your teen today can help them become more responsible with their credit tomorrow.
- Let Them Fail
As a parent, you never want to see your children struggle or fail, but in a controlled environment, that can be a vital learning experience. Do they want to blow all their savings on new sneakers, a toy, or a video game? Let them. Their inability to make another purchase or do something fun with their friends until they replenish those funds will teach them more than any talk could.
The bottom line: You are your child’s best teacher—in financial literacy and in life. By following these simple tips, you can take the first step toward preparing your child to responsibly and successfully navigate their financial future—and that’s good for all of us.