3 tips for parents teaching financial literacy to kids

Paul Appleton
Posted by Paul Appleton
Consumer Banking

Just as many kids adopt strong healthy habits from their parents, such as eating their broccoli or brushing their teeth, the home can be a great place for kids to internalize good financial behaviors.

Father handing money to his son while sitting in front of a big, pink piggy bank.For those parents looking to help their little ones, here are three simple ways to kick-start financial education at home:

1. Give your children piggy banks. In today’s digital world, the concept of saving can be difficult for small children to grasp. Make money tangible by giving your children a piggy bank and encouraging them to save up for a “big-ticket item” they want today, but can’t afford. Use the piggy bank as an opportunity to teach them what each coin means and count their savings with them to reinforce their math skills.

2. Open a savings account. As your children get a little older, you may open a savings account with a unique online banking ID, so they can see their balances growing over time. Consider opening multiple accounts reflecting different savings goals, such as a college fund, so they can begin to understand the importance of delayed gratification and understand how it feels to work towards something.

Some parents choose to encourage their children to save a portion of the money they earn from babysitting, shoveling snow, a summer job, or first internship. This helps children appreciate how working hard and earning money can give them control over their finances and reinforces the value of a dollar.

3. Teach your children how to grow their savings. Once your children have a little money saved, it’s important to teach them how to help their savings grow by investing the funds. For example, you may open a brokerage account for your child with you as the custodian, or you can set up a virtual portfolio online as an educational game (see this MarketWatch game). Explain how a stock is, simply put, ownership in a company, and if the company does well the stock’s value will rise; but if the company does poorly the value of the shares will drop. Help your children think about publicly traded companies that they value in their lives. Research the stock with them and allow them to test out investing in these companies to see how their shares do over time.

These three tips may help as starting points that lead to further educational opportunities around topics like budgeting and credit. As I teach my children similar concepts, I believe these lessons may be investments that yield financially literate adults!

What other ways have you taught children financial literacy? Please add them in the comments section below.

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