One of the best things my mother did for me early on (and there were many) was to open up a bank account for me. If you help your kids understand money at a young age, they will have a better chance becoming comfortable with it.
When I was young, banks actually gave you a little book that showed you how much money you had in savings. Each time you went to the bank, they added on any interest you earned. And I learned that the interest also earned interest. It was exciting to watch the numbers grow!
Even today, when I check my accounts, the magic of compounded interest still makes me smile. Kids of any age love magic — and it helps when you truly appreciate the power of interest earning interest. Just one of many things children can learn about money at an early age!
Do your kids understand money?
Think about where they stand in the power hierarchy of money. Do they decide how any of the money in your household gets spent? Do they have any of their own? If so, do they have power over how any of that gets spent?
Not that I’m suggesting how much control they should or shouldn’t have. Just worth taking a few minutes to really think about their exposure to money and all the roles it might play in their future life.
Even if they have a vague idea of what things cost and where money comes from, a solid foundation when young can really help later on. Could also be helpful now when you need to say “no” about something they want.
Tips to help your kids learn more
While each person eventually comes up with their own relationship with money, all too often kids are kept away from “money talk”. So it might be worth trying a few things to up their financial literacy IQ.
Here are a few ideas you might find helpful. Or perhaps, they will help spark your own ideas to help your kids understand money a little better:
Play stock market
Suggest your child pick a company they’re interested in that has a stock. Something like Nike or Tesla or even Disney. Anything they might enjoy learning more about. Then have them pretend to buy 100 shares (calculating what that would be in real dollars).
And now your child can start following the company’s stock price, as well as finding news items about the company that might affect the stock. They’ll learn and, hopefully, have fun. Maybe one day they’ll even buy some shares for themself — or you!!
Start a bank account
Just like my mother did for me, you can give your child a bank account of their own. Perhaps start them off with a few dollars. But they will be in charge of adding money. (Well, you can add some too, of course.) Over time they get to watch it it grow.
And if they want to take money out of their own account, until they are 18 (age your choice) they agree to come to you first. All they need to do is explain their thinking, and how they plan to help replenish what they withdrew. (That can help them develop a good financial practice.)
For the most part, you’ll say yes. As long as they’ve done the thinking. Even if you think the item is pretty stupid. With the mutual understanding that it has to pass the “will this hurt anyone” test.
It’s a chance for them to learn to be responsible with money. And to show you that the trust you have in them is well placed. It’s also a chance for them to see how easy it is to wind up with lots of stuff — but almost no money. And that’s a topic worth discussing at some point anyway.
More ways to help kids understand money
Those are just a couple of suggestions that you can adapt to work for your own family. But you might also think of ways to show them how to responsibly manage credit, budget, and even look for bargains.
And, while on the credit topic, you might also let them know why good credit matters so much. Not only does it affect your chance to get a job (background checks), but people with bad credit actually pay more for things like mortgages / loans, insurance, and the credit cards themselves.
Please feel free to share your own ideas with us!