Teaching Kids About Money

Posted on August 10, 2015

Teaching Kids About Money

It's never too early to start teaching kids about money. After all, the lessons we learn as children create the foundation for our future.

Although your seven-year-old might not be able to grasp the importance of building a strong credit score, you can certainly teach him how to save up his allowance to purchase that special toy he desperately wants. Through the years, you can incorporate other financial lessons as well, such as creating checking and savings accounts, using credit cards responsibly, and saving for retirement. If you aren't sure which lessons to teach or how to approach the subject, check out our tips below.

Teaching Kids About Money

Start With Saving

Without a doubt, one of the most critical lessons your child will learn about money is the importance of saving. Immediately  spending an allowance may be tempting, but your child needs to learn that if he or she saves up money over time, they can afford to purchase more expensive items. Additionally, explain that we save money for the future so that we can manage through tough times, when money is tight, and also enjoy life after retirement. When your child reaches their late teens, teach them to build an emergency fund for unexpected situations (a flat tire, for example, or a stolen phone).

Delve Into Budgeting

Without a budget, it's difficult to pinpoint where your money is going, how much you can afford to save, and where you could cut corners. Have your child track where they spend money for a month or two, so that they can see how much they spend on movie tickets, new clothes, sweet treats, video games, etc. Then, help them create a budget for their allowance, allocating some money toward "wants" and some toward "necessities" and "savings". If they want to save up for something special, sit down together and figure out where they could save a bit of money. For example, maybe they could rent DVDs instead of going to the movies each week in order to buy that cool new pair of jeans. Finally, I think we can all agree that giving back to one's community is important. Teach your child from the start to give to charities that are important to them. If they put away just $1 each week, they could give over $50 to their favorite charity at the end of the year

Explain Credit

When your child is a little older, you can start explaining how credit works. They will have seen adults paying with credit cards over the years, but they need to understand that credit cards do not provide free money. Instead, they allow adults to borrow money to pay for things. When the credit card bill arrives, the adult must pay back all of the money they borrowed that month. Explain the importance of paying on time and in full, both to avoid debt and to build a healthy credit score

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This is just the tip of the iceberg when it comes to teaching kids about money, but with these three steps, you can give your child a basic understanding of how they should be saving and spending their money if they want to be financially responsible and secure. 

Are you ready to introduce your child to the world of finance? If you live in southwest Missouri, you might be interested in the Kirby Kangaroo Club offered by BluCurrent Credit Union. In the club, children up to age 11 are taught how to manage their finances and the importance of saving money. Children receive special gifts in recognition of their savings as well as invitations to club events. To learn more about the credit union's services and benefits, please stop by one of our branches or explore our website.