Kids and Money: Tips for Teaching Your Children about Financial Planning

Teaching Financial Planning to Your Children

Teaching Your Children about Financial PlanningSuccessful financial planning should be a family affair; as such, you should work with your financial investment advisor and financial planner to create a sound financial plan that is rooted in your family’s shared financial priorities and expectations and builds a sold foundation for a family to achieve their financial goals together. To come out on top when it comes to the often precarious mix of finances and family, it is essential to communicate openly about issues and educate your children (in an age-appropriate manner) about financial issues.

Perhaps you were taught as a child that it is bad manners to talk about money (and religion, politics, sex, and rock and roll to boot!). Fortunately, there has been a paradigm shift— and financially prudent families are beginning to understand the importance of talking to their children about money and instilling good financial habits from an early age.

Here are just a few of some actionable ways to teach kids about financial planning and the value of the dollar:

Open a bank account for your kids: Many banks have savings accounts designed especially for kids with no minimum balance amounts and no fees if the account falls below a certain amount. If your kids are old enough to grasp the more simplistic aspects of interests (“you can make money off your money just by keeping it at the bank”), they are likely to appreciate the “free money’/“something for nothing” aspect of it and enjoy watching their savings grow. Since today’s kids tend to love all things tech-related, they will also enjoy reviewing their account balances online.

When introducing kids to the concept of banks and saving accounts, be sure to emphasize that the bank is a safe place to keep their money. And that even if the bank were to go out of business or be robbed, they would not lose the money they had in their bank account. Take your child to the bank so they can see how it operates and the various people who work there. Be sure to discuss with your child ways they can earn money to deposit in their account: whether it be from doing extra jobs around the house to earn money, holiday and birthday money gifts, or even proceeds from their entrepreneurial endeavors such as a lemonade stand or shoveling snow for neighbors.

Explain the difference between needs and wants: It is important that children understand the difference between needs and wants; needs are things we must have in order to survive; and wants are things that we may want, but aren’t necessary for survival. Work with your kids to create a list of needs (i.e., clothing, shelter, food, and etc.) and wants (toys, electronics, television, and etc.). In an age appropriate manner, try explaining that there is a limited amount of funds. If you spent all your money on iPads, candy, and tickets to the amusement park, there would be no money left for food or to pay critical bills such as rent and heat.

Involve kids on shopping trips: If you want to teach your kids about the realities of money and financial management, it is best not to discuss it in the abstract. Kids will learn more if you talk about these thing while on the scene, using real-life settings as your classroom for financial lessons. A great place to do this is at the grocery store.

  • Have your kids do the math: For example, how many ounces of granola are in a box of granola? Calculate the price per ounce (or show your child where to find this information on the price tag on the store shelf) and then compare the price per ounce for other brands of granola or different sizes of granola boxes. Discuss issues of quantity vs. quality and wants vs. needs.
  • Store/generic brands vs. name brands: Show your kids that for many products there is a store brand version and a name brand version. For example, Charmin brand toilet paper vs. Publix/Target/Walmart brand toilet paper. Sometimes, the store brand is equal or even better than the name brand, other times it is of lower quality. You can ask your kids to do a comparison by testing the products at home.
  • Emphasize planning: Plan out a grocery shopping list before going to the store. Show your kids that by following your list you can focus on needs rather than aimlessly roaming the aisles and throwing whatever strikes your fancy at the time (impulse buys) into your grocery cart. You can also discuss sale shopping and couponing at this time. Emphasize that while a coupon can help you save money, you shouldn’t necessarily buy something just because its on sale.
  • Check your receipts: Teach your children to pay attention while purchases are being wrung up to make sure they aren’t being overcharged and then double-check this by reviewing the receipt.

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Summit Brokerage Services, Inc. is part of Cetera Financial Group®, a leading network of independent retail broker-dealers. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.

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