A Prescription for Raising Financially Savvy Children

/ Fiduciary Financial Advisors/

Just as we prioritize early intervention in healthcare, teaching your kids about money early sets them up for a healthy financial future. Children develop money habits from a young age, so it's crucial to guide them toward smart financial decisions. Here are some ideas to nurture your children’s financial literacy, broken down by age group.

Young Children (Ages 3-7): Building a Strong Foundation

  • Save, Spend, Give: Make it visual! Use three jars labeled "Saving," "Spending," and "Giving." This helps young children grasp the concept of balancing different financial goals. For example, they could save for a coveted toy, spend some on an ice cream treat, and donate to a cause they care about, like an animal shelter.

  • Needs vs. Wants: Explain the difference between needs (things we must have to survive, like food and shelter) and wants (things we'd like to have, like toys and candy). Involve them in grocery shopping and explain how you prioritize needs and stick to a budget.

  • Delayed Gratification: Teach patience! Help them set small savings goals. "If you save your allowance for two weeks, you can buy that awesome robot!"

  • Fun and Games: Make learning about money enjoyable! Play money-themed board games like Monopoly Jr. or Life.

Middle Childhood (Ages 8-12): Developing Key Skills

  • Money = Time: Connect effort to earnings by offering paid chores or an allowance. Help your children understand that buying a video game requires a certain number of chore hours. This reinforces the value of hard work and mindful spending. Want to dive deeper? Check out my full blog post on this topic.

  • Budgeting 101: Introduce the concept of budgeting. Give your child a small allowance and help them create a simple budget, perhaps using a whiteboard or spreadsheet to track income and expenses.

  • Savvy Shopper: Turn shopping into a learning experience. Teach comparison shopping, looking for deals, and using coupons. They'll feel empowered seeing their money go further!

  • Banking Basics: Open a savings account for your child and explain how interest works (and the magic of compound growth!). Encourage them to deposit a portion of their allowance regularly. To make it exciting, find a bank with a good new account promotion or help them compare interest rates to find the best deal.

Teenagers (Ages 13-18): Preparing for Adulthood

  • Credit and Debt: The Good and the Bad: Explain the responsible use of credit cards and the dangers of high-interest debt. Discuss credit scores and how they can impact getting a loan for a car or a house in the future.

  • Real-World Experience: Encourage your teen to get a part-time job. This provides valuable experience with earning, managing money, and developing essential workplace skills.

  • Investing for the Future: Introduce basic investment concepts like stocks, bonds, ETFs, and mutual funds. If they have earned income, consider opening a custodial Roth IRA to help them start investing for their future with tax-free growth!

  • Setting Financial Goals: Help your teen set realistic financial goals, such as saving for college, a car, or a down payment on a house. Discuss the costs and benefits of different choices, like whether a pricey college is worth the investment. “Price is what you pay, value is what you get.” -Warren Buffett

Essential Principles for All Ages:

  • Open and Honest Communication: Create a safe environment for money conversations. Encourage your child to ask questions without fear of judgment.

  • Be a Role Model: Your kids are watching! Model good financial habits and be open about your own financial journey (within appropriate boundaries).

  • Personalized Approach: Every child is different. Tailor your teaching to their interests and learning styles. If your child loves sports, use sports analogies to explain financial concepts.

  • Tech-Savvy Tools: Utilize apps like Greenlight to give your child hands-on experience with budgeting and managing money in today's digital world.

  • Mastering Money Emotions: Help your child understand how emotions can drive spending decisions. Teach them strategies to manage impulsive spending and stay calm when the stock market takes a dip.

By investing time and effort in your children's financial education, you're empowering them to make sound financial decisions and achieve lifelong financial well-being.

Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.