Finance can be a sensitive topic to talk about, especially with your kids. But financial literacy starts at home.
Even if managing money isn’t your strong suit, you can still teach your kids what you've learned along the way and talk to them about mistakes you've made. You don’t have to break out your last statement to show your kids, but you can discuss common issues that they’ll come into contact with later in life.
Why is it Important to Talk About Money?
Many schools do not teach basic finance, so if kids don’t learn from you then how are they going to build good financial habits? You might not consider yourself to be a subject matter expert, but chances are you know more than you think you do. After all, managing an account and making purchases is part of your everyday life.
Think about financial experiences that you would be comfortable sharing with your children. How did you purchase your first car? Talk about something that you really wanted and saved up for. Don’t forget to mention money mistakes or shortfalls so your child understands that everyone makes errors.
Exercises to Do at Home by Age Group
The subject of personal finance has many parts, so it’s important to segregate your conversations based on your child’s age and comprehension level. The best way to get your child involved and excited about money is to have a conversation with them, don’t lecture them. Here are some easy ways on how to talk to kids about money:
Age 3-4: Go Over Counting and Introduce Currency
Activity: Practice matching up the name of a coin to the coin itself. Try mixing a pile of change and ask your child to pick out the coins by name.
Age 5-6: Practice Addition and Subtraction
Activity: Give your child some money and present a few items to her with a price on each. Let your child go to the “store” and pick out a few items to buy. Discuss how much money she needs to buy the item and how much she'll have left if she buys a cheaper item.
Age 7-8: Hard Work Equals Rewards
Activity: Give your child a weekly allowance. You can either do this by making it like a weekly paycheck or by assigning tasks that must be completed. The rule of thumb is to pay your child 50 cents to one dollar per year of age, meaning they’ll start out at $3.50 or $7.00 per week.
Age 9-10: Open a Savings Account
Activity: Take your child with you next time you visit a Lake Trust branch and open a savings account for them. Lake Trust Youth Membership Savings accounts only cost five dollars to open and do not have minimum balance requirements. Explain why you're opening the account and set weekly savings goals. Keep a ledger and help your child record her transactions.
Age 11-12: Practice Smart Shopping
Activity: Go over the weekly ads and compare prices of items on your shopping list. Show your child how to look for sales and coupons. Let him hang on to your coupon book when you go shopping so he can match the coupon to the product.
Age 13-14: Talk About Credit and Debit Cards
Activity: Emphasize that credit is borrowed money that you must pay back. Explain the consequences of not paying back the full balance and the difficulties of being in debt. Take each card out of your wallet and explain if they are used for debit or credit.
Age 15-16: Open a Checking Account
Activity: It’s a good idea to keep spending money separate from savings. Start teaching your child about budgeting and open a checking account for him. If your child has a smartphone, have him download the Lake Trust Mobile Banking App on the App Store1 or on Google Play1 so he can check his balances and keep track of purchases.
Age 17-18: Look Into Student Loans
Activity: Sit down together and discuss college plans. What does your child want to major in and what type of education would be best for her desired career path? Find financial aid and student loan options and discuss how to repay those debts. Even better, look into scholarships and grants from local community organizations or nonprofits, like the Lake Trust Foundation.
Talking about money doesn't have to be a drag. Turn each learning step into a new adventure and enjoy spending time together. It might seem silly to teach such basic information, but your patience will help your child become smarter and more independent.