In these times of economic uncertainty, talking with your kids about money is more important than ever. Whether you’ve hired a high schooler or college-aged student at your business this summer or have kids at home, teaching financial literacy is vitally important. We all want children—our future workforce—to be wise with their money, make responsible spending and saving decisions, and experience financial success.
It’s never too early to start the money conversation. Even little kids can start to grasp the idea of being compensated for the work they do and how to decide if it’s better to spend or save their money. This month, Senior Vice President George Butkovich and the rest of the Platinum Bank team shares how you can start talking to your little kids about money. Check back next month for tips for raising financially savvy teenagers.
Teaching Financial Responsibility Sets Kids Up for Success
While no future employer is going to ask for an applicant’s records of piggy bank deposits and withdrawals, teaching financial responsibility early helps set little kids up for future success. Learning the value of paying bills on time, living up to financial obligations, and making wise spending decisions are skills that will serve children for the rest of their lives.
Understanding the Value of Work
Opportunities to teach little kids the value of work are all around you. Take those pesky acorns your oak tree is dropping in the backyard right now, for example. They provide an excellent opportunity to teach 3–5 year olds the value of work. Offer them a penny for every acorn they pick up, then work together to count all the acorns they gather. Dole out their pay and then help them count it. You can use this as an opportunity to talk about how they want to use their money.
Talking about Money with Little Kids
Engage young children in conversations about money. Ask them what they’d do with $10, and use their answers to have a broader conversation about spending and saving. Let them help plan your next grocery trip by perusing the weekly ad with you. At the grocery store, explain why you choose to purchase store brands or brand-name items or buy larger quantities when smaller options are available. Make an appointment with your personal banker to open a bank account in their name, and help them manage it.
Teaching the Value of Compound Interest
Once children are 7–9 years old, they can start to understand the value of compound interest. SVP George likes to use the concept of investing a penny with a 100 percent daily interest rate. It would take just 27 days to make a million dollars! While an unlikely real-life investment scenario, this simple idea can help make understanding compounding interest and savings easier. If you compensate kids for doing chores, encourage them to save their earnings in a savings account, where they can see compound interest in action and reap its benefits.
Teaching financial responsibility and literacy should start when kids are little. The foundation you lay during these years will serve them well when they get their first job, first credit card, first car, and beyond. Check back next month for tips on how to help older kids become financially savvy.