Kids and Money -- Lessons Begin at Home

Most people believe parents should be teaching children about finances - but research suggests that's not happening. In a credit union poll of about 3,400 consumers, 19.9% said they received most of their financial education at home. Most 62.2% said they learned about money through experience and life lessons. Schools didn’t pick up the slack, either. Only 6.5% received most of their financial education in the classroom.

Parents want their children to have a good handle on finances before kids leave the house in their late teens or early 20s, but most aren't sharing the necessary wisdom to make that happen.

T. Rowe Price's 2017 Parents, Kids and Money survey found 69 percent of parents have some reluctance discussing financial matters with kids. About 35 percent of parents rated talking to their children about family finances as either very or extremely uncomfortable - ranking it alongside talks about death and drugs.

Partly, parents may feel too self-conscious about their own financial situation to be comfortable sharing with their children. The T. Rowe Price survey found parents who have declared bankruptcy are 24 percent more reluctant to discuss money with their kids. Parents carrying more than $5,000 in credit card debt are 14 percent more likely to feel uneasy having those financial conversations.

Financial literacy is simply the act of learning how money works and how to manage finances in a responsible manner. Many people never learned this important information before receiving their first credit card, car loan or moving into their first apartment.

Most children unconsciously look to the adults in their lives to learn financial concepts. Parents are typically the first people who will explain the value of money to children. Whether it's through a weekly allowance, saving birthday and Christmas money in a piggy bank or helping them open a checking account after kids start their first job, parents significantly influence how their children will manage their finances throughout life.

We often hear the old adage, 'you're never too young to start saving,' but many people do not put it into practice. We want to help change this behavior.

Tips to teaching children financial literacy:

• Set an example. Kids glimpse financial concepts for the first time through the adults in their lives. Children who consistently see their parents pay the bills on time and keep up a budget are more likely to adopt those practices in their own lives. Parents who have made financial mistakes should also share the experience with their children. That knowledge can equip kids to avoid the same mistakes with their money in the future.
• Make savings a tangible concept. Encourage younger kids to collect spare change in a clear jar or container so they can see their savings grow. Each time the kids want a small treat, parents can offer to put the money they would have used to buy the treat into the "savings jar," instead. Once the jar is full, children can count the money and use the funds to purchase an extra-special treat. That way, they'll associate a sense of excitement with savings - they'll understand that delaying gratification can lead to a greater payoff down the road. Parents of teens can apply the same concepts to their adolescent's first savings account. They can be encouraged to delay gratification to save for something larger.
• Have kids learn with their own money. Kids will learn the value of a dollar better if the dollar is their own. Younger children who are paid a small allowance for chores they complete around the house will learn the concept of working for money. Kids can then begin to spend their own money on some of the things they want. They'll begin to appreciate what these items actually cost and will be more open to lessons about price comparison. Likewise, teenagers should be encouraged to get a job, even if it's a part-time gig on weekends or vacations.
• Get kids familiar with banking. Parents can make a trip to their financial institution an exciting event for younger kids. Let them in on the process - maybe even let them press the buttons on the ATM or help to fill out a deposit slip. They'll feel included in adult chores and won't feel intimidated by banking later in their lives. Pre-teens can open their own checking accounts and become familiar with handling checks and debit cards.
• Get help. There are plenty of resources out there for parents feeling mystified about their children's financial education. Organizations like the JumpStart Coalition publish libraries of financial education resources on their websites.

Willis-Knighton Federal Credit Union has special savings accounts for children and teens. Scotty Savers is for children ages Birth through 12 years old. Extreme Teen is for ages 13- 17. At age 16, we can add a checking account to their Extreme Teen account to help them learn how to manage a debit card. They receive a quarterly newsletter just for them. To open an account for your child, bring their Social Security Card and your identification. Teens will need their school ID or their Driver’s License if they have one. You can set up Payroll Deduction to have money deposited into their account each pay period. Teach them to always save a portion of any money they receive from birthdays or Christmas.

Beginning Nov. 1 – Dec. 31, 2019, Kids accounts may be opened for FREE!

Help your child learn to make wise financial decisions. Start with opening their own account at Willis-Knighton Federal Credit Union.