According to behavior experts, providing kids with a strong grasp of the concept of money reinforced by practical money management skills at a young age has a profound impact on financial success later in life. In fact, a popular study published by Cambridge University asserts that adult money habits are formed by age seven!
We’ll help you get your kids off on the right financial track with the suggestions below:
Make a clear connection between money and contribution: Instead of routinely handing children an allowance every week, consider giving them a pre-determined amount of money only after completing specific tasks on which you and they both agree. As explained by best-selling personal finance author Robert Kiyosaki in “Rich Kid Smart Kid: Giving Your Child a Financial Head Start”, these tasks should be in addition to those that they regularly do to take care of themselves (e.g. brushing their teeth and doing homework) and basic responsibilities such as setting the table and putting groceries away. Instead they should be focused on age-appropriate projects that add value—such as paying your teen to scrub tubs, mow the lawn or wash the car.
Pay young children right away: As soon as children are able to count, they can and should start learning about money. At the same time, very young children aren’t easily motivated by the idea of doing work now in order to receive a future payment. For children under seven years old, be prepared to pay them immediately after they complete an assigned task in small denominations of bills or coins (which gives them an easy way to divide the money for spending and saving). After this age, start paying them weekly for assigned tasks.
Get comfortable saying no when you should: By setting clear limits when you’re shopping with kids, you’re not only sending the message to spend within your means, you’re also allowing them to experience an essential element of their emotional development—delayed gratification. When they insist that you buy them a toy or other item out of your budget, try to redirect their focus to what they would need to accomplish, and how long they would need to save, in order to purchase it themselves.
At the same time, try to avoid telling children “I can’t afford that” as it can give kids the impression that you’re financially insecure and not in control of your money. Instead, you might say “We’re not going to buy that now” or “That costs more than I’m willing to spend.” For more help on how to handle kids when you’re caught in this position, visit Kars 4 Kids.
Give kids a training ground with real-world experience: From an early age, involve children in the day-to-day realities of money to give them the know-how they need to manage it, and the opportunity to learn from mistakes. A classic example that works well for kids ages four to six is to give them a few dollars at the grocery store to select and buy fruit. The key is to have them handle the money throughout the entire buying process. And as difficult as this can be, resist the urge to replace any cash that they lose.
When they are about seven years old, it’s a good time to encourage kids to start setting medium-term savings goals by setting money aside for items that they want such as bikes or pricier toys. In their pre-teen and teenage years, they should begin saving for longer-term goals by using a savings account at a financial services provider such as your credit union. In high school, learning to set and maintain a budget is a good practical skill for them to develop as they learn about investments, debt, and handling a checking account. In addition, getting a part-time job during the summer break or engaging in some kind of entrepreneurial pursuit is an excellent way for them to build confidence at this age.
Is it time to take the next step in your child’s financial education and prepare them for a bright future by helping them open a savings account? SF Police Credit has created two savings accounts just for kids and teens! With age-appropriate tools and games, they provide plenty of fun ways to teach kids financial responsibility, the basics of business and the economy. Find details at http://bit.ly/YouthSavingsSFPCU.