Parent’s Guide to Raising Financially Savvy Kids

As a parent, you have the opportunity to teach your kids to be financially savvy. This can save them from making avoidable financial errors in the future and allow you to create a person who is comfortable with the idea of money, responsible with their spending, and proactive with their savings.

By using your own knowledge and setting up the right kids savings account for them at your local credit union, you can give yourself peace of mind knowing your child is well-prepared to handle money now and for the rest of their lives. Here are a few things you can discuss with your kids to promote financial literacy from an early age.

Saving Money

Saving is one of the most popular topics for teaching children about money, and this is often taught by example. A University of Michigan study found that children as young as five have distinct reactions to saving money that translate into their real-life spending behaviors, so introducing the idea to them young is beneficial.

This can start with something simple like using a piggy bank when your child is younger, but as they grow, you should upgrade their savings habit to something more structured. A kids savings account can be a great way to do that, and the best ones can come with benefits for your child.

Local credit unions typically offer a child-exclusive savings account option. Some come with benefits such as deposit matches and welcome kits so your child can leave with something after parting with their hard-earned savings. From there, you can set up a routine with your child to continue depositing money into their account over the years and watch their balance grow.

Responsible Spending

Whether they receive money as a gift or earn it themselves, it’s important for kids to know how to spend their own money responsibly. They’ve actually been learning about spending for a long time. Professionals say the number one financial behavior children learn from their parents is their spending habits, so the best place to start is by being a good example yourself.

When you deliberately introduce the concept of spending to your child, it will likely go one of two ways. Either they’ll be hesitant to spend, or they’ll spend every chance they get. Don’t worry, both instances are great opportunities to discuss responsible spending and teach them what exactly that entails.

Discuss setting savings goals and not overspending. Having the money to buy things that you really want is a great feeling, as is rewarding yourself by spending in moderation. To help them learn how to do this, encourage your child to be thoughtful about their purchases before they make them. Teach them to ask questions about what they want to buy and why. For instance:

• Do I need this?
• Will I use or enjoy this?
• Do I have enough money to buy this item?
• Is there something else I’d rather save my money for?

There are no right or wrong answers to these questions, but thinking through the responses will help them learn how to make savvy decisions about spending their money.

Budgeting

Another great thing for parents to teach their children is how to manage their earnings. If your child is receiving money from an allowance, chores, or a part-time job, helping them create a budget is an excellent way to teach financial responsibility. This might sound farfetched if your child is quite small, but good habits started young will carry through to good habits when they’re older. The important thing is to make the steps age appropriate.

Have your child think about what they do with their money in terms of categories. Younger children have simpler needs and might only have “Save” and “Spend” categories. A teenager might also have necessary expenses to pay for, like a car payment, before they can set aside savings or spend at will. Regular repeat expenditures that aren’t necessities might also have a category, such as money spent on a weekly trip to the vending machine or school store.

Managing a Checking Account

Checking accounts are great options for older children who are managing more income and expenses. They also help promote financial independence. A youth checking account is a safe place for kids to store their hard-earned cash while still having easy access to it. Plus, learning to handle money when it isn’t in the form of cash is a vital skill. These days, more transactions than ever before are made online or with debit cards. While no physical cash changes hands, the spender still needs to be aware of how much money they start with, how much they spend, and how much they have left afterward.

Teach your child to track their deposits and payments from the checking account and maintain a positive balance. Many accounts offer the option to sign up for digital banking. This can give your child even more control of their funds. With digital banking, they’ll be able to check their balance, make transfers to their savings account, and look at their statements to see how much they’re bringing in and how much they’re taking out.

Setting up automatic transfers between their checking and savings accounts is also a helpful option. They can transfer a set amount from their checking to their savings account on a set day each week or month. Making this action automatic is a great way to help them meet their savings goals while eliminating the need to remember the manual task.

Resourcefulness

While you may be quite knowledgeable when it comes to finances, it’s okay to admit that you don’t know it all. In fact, it’s good to teach your children that, when you don’t know something, you should talk to someone who does.

If you or your child needs assistance with finances, you should feel comfortable enlisting the help of professionals you trust. This is simple when you’re a member of a local credit union. Credit unions like Mid-Hudson Valley Federal Credit Union are equipped to provide financial information and support for members of all ages through educational resources, first-class member service, and community involvement.

With a bit of information, it’s easy to raise financially savvy kids who understand how to manage their money by the time they’re adults. Start your child’s financial journey today by opening a kids savings account with them, and watch them grow.