Financial Literacy: Money Management For Kids & Teens

Open communication is the cornerstone of financial education. Teaching your kids financial literacy is an important task because it can benefit them throughout their lives. With that said, it’s never too early to start teaching them the importance of money management and personal finance for kids.

If you’re wondering how to teach kids about money in a way that will resonate and stick with them, your own life experience is a great place to start. As they grow older, continue to be honest about your own financial journey, the mistakes you've made and the lessons you've learned. Be open with your children about your values, goals and expectations around money. Hopefully they’ll learn from your experiences and save themselves financial pain down the road. Financial literacy is a lifelong journey, and Rivers Edge Bank provides financial resources and tips to educate your children every step of the way.

How To Teach Kids About Money As They Grow

A good way to start practicing personal finance for kids and their money habits is to take money earned from an allowance or job and divide it into three categories. This way, their allowance can go toward short-term spending money, savings for a more costly item such as a bike or a computer and longer-term savings for things like college or a car.

For younger kids, money can be kept at home in separate containers. You can help them count the money and show them how much they need to save to buy something they want. To teach teens about money, you can open an interest-earning savings account or certificate of deposit. This is a great way to show how their money is protected in a financial institution and how compound interest helps money grow over time. And with online or mobile banking, they’ll be able to learn to monitor their savings and spending with ease.

As a parent, you can set an example by talking about how you save money for items you purchase. You can also teach them about value by comparing product prices and showing them how they can save by not always buying the most expensive thing. Ultimately, the goal of saving is to teach your kids important financial literacy lessons like how to avoid debt and to set aside money for when they need it most. If you have young children and still feel unsure of how to teach kids about money, the basics are a good place to start.

Kids & Money: Teaching Your Child The Basics Of Financial Literacy

How do you start teaching young children about money? You talk to them in simple terms and work with examples that make sense to them. At early ages, you’re not prepping them for an economics degree, but you can at least start talking to them about the importance of value while helping your kids save money. Get started with these tips to teach kids about financial literacy and their role in making smart financial decisions throughout their lives:

1. Introduce The Concept Of Work To Receive Pay

Talk to your children generally about your job and why you work so you can make money to buy things you and your family need or want. Explain what your job enables your family to have, such as groceries, school clothes and vacations.

2. Set Up An Allowance

Consider giving your kids a regular allowance or paying them for doing certain small chores around the house so they can see what money looks like and how they can earn a little. Saving can start with something as simple as a weekly allowance for chores they do around the house or yard. Explain to your child that this is similar to how you work to earn money so you can buy things.

3. Help Your Kids Understand The Value Of Saving Money

Help kids save money by talking to them about how savings work. For example, if they’re old enough to understand math, show them how earning $10 a week will add up to $520 in a year. As a reward for saving, you could even offer to pay them a certain amount of interest at the end of each month so they see how money’s value can increase over time.

4. Demonstrate How To Save

Encourage your kids to put their money in separate jars or piggy banks: one for things like inexpensive toys or books; one for more expensive things such as a cool pair of shoes; and maybe one that could be used on gifts for others. One smart money management strategy for kids is to collect money in a clear jar that will let them see the money they add. Another idea is to store money in a piggy bank, which they will be able to feel weighs more as they add to it.

5. Discuss The Impact Of Spending Money

Next, talk to your children about spending and how their spending habits will affect their savings. When they tell you they want something, whether it’s a game, a toy or a digital device, talk to them about the cost of the product and whether they have saved enough yet. You might even show them how you would look for a lower price to reduce the cost. Then, take the time to show them how much savings they would have left after making the purchase.

6. Show How To Count Different Bills & Coins

When considering how to teach kids about money in a way that makes an impression, don’t forget to walk them through the physical value of money and what different dollar bills and cents represent. Try to keep cash on hand so your children can get a better idea of what it’s worth, building a strong foundation of financial knowledge for them before they learn about credit and debit payments later in life.

7. Explain Why Money Management Matters For Kids

One way to highlight the importance of finance for kids is to demonstrate money as a finite thing. Describe how spending money on one thing gets rid of that money from their savings forever, meaning they might not be able to buy the next thing they want right away. Share how to prioritize what they want with what they can afford. Talk to them about how they may need to wait to buy some things until they have more money saved up.

8. Practice Money Management Activities For Kids

Practicing hands-on money management activities for kids allows you to bring your knowledge of your kids and money best practices together to engage them more actively in their finances. One way to challenge your children with a money management activity is to talk to them about the coins or paper money they have saved up and periodically count it with them so they know their savings grows. Let them know that even you have to wait to buy things. What this might look like: “Look, you have four dollars! Last time we only had three! One more and we can get that toy you want.”

When you take your kids to the store, talk with them about how much some of the items they like cost. That can help them understand what they have saved at home is more or less than what they need to be able to afford the item. For example: “All you have to do is save two more dollars and you could buy that!” Once you’ve helped your kids save enough money to buy something they want, let them pick the item out and hand their money to the cashier so they'll be excited as they learn the value of their money applied to a specific item they chose.

As they grow older, you can even start teaching kids about more advanced financial literacy topics, like loans and how you sometimes need to borrow money as long as you promise to pay it back. You might say: “I know you have six dollars at home, so I’ll loan you the money now, and you can repay me with six of your dollars when we get home.” And when you get home, let them give you that money from their bank so they see the loan through to the end.

Teaching Teens About Money: Checking Accounts, Debit Cards & More

Teaching teens about money should become more about protecting and keeping track of the money they earn. They should hopefully have a solid enough financial literacy foundation by now to start taking more independent steps toward money management. That’s why opening their first checking account is a smart step toward building a solid financial future, for several reasons:

1. Opening and maintaining an account helps your kids build a relationship with their financial institution.
2. It also starts a financial history, which can help when the time comes for them to apply for their first car loan or rent their first place.
3. And what they learn about managing their finances as kids and teens today teaches financial responsibility for when they’re adults tomorrow.

A checking account is also a good way to get a debit card for your teenager as you continue to teach them about money and all the ways they can use it. You should take the time to address some of the potential challenges your teen might face, like impulse purchases, peer pressure to overspend, online scams, phishing attempts and what to do if they lose their card. Remember that now is the time to set boundaries but also let your teen experience a sense of financial freedom as they take charge of their spending.

Tips For Getting A Debit Card For Your Teenager

Getting a debit card for your teenager can feel like a big step to you as their parent but also to them as they navigate this new responsibility. As your teen begins to use their card, continue to communicate. Address any questions or concerns they have promptly and openly. Since there’s a good chance your name is also on their card or account, any financial trouble they get into will come back to you, so be sure you’re talking through your teen’s decisions and addressing any concerns swiftly. Establish spending limits and consequences for breaking the rules, but also explain the reasoning behind your guidelines.

Once you’ve had the talks and shown them the ropes, you can begin to put it all into practice in the real world. Start with small, supervised debit card purchases to build trust and understanding. If you haven’t already, this is an excellent time to talk about budgeting basics and saving up for big purchases and how that will affect their other spending. One helpful trick for effectively teaching teens about money is to ask them to consider the “why” behind the purchases they make. Thoughtful decision making and the ability to distinguish between “I want this” and “I need this” will go a long way toward teaching them to spend responsibly, staying within their set budget.

Demonstrating how they can use online and mobile banking tools to track their expenses in real-time is another way to help your teen stay in reality and know where their money is going. Making the switch from cash to debit card payments is a good time to teach your teen how to access their checking account online and the importance of keeping up with their available balance. This is also a chance to teach teens about what unauthorized transactions could look like so they know if their card is ever compromised. By learning to spend within their means and monitor intangible spending, your teen can develop positive habits that will continue to benefit them as they become more independent.

Explore Resources For Teaching Kids Financial Literacy

To get started driving discussions about finances for kids, turn to the pages of a trusted book tailored to children. The American Bankers Association compiled a list of books featuring relevant financial literacy topics and concepts for children across various age groups. Rivers Edge Bank has no affiliation or association with any of these books or authors. The list provided is simply a starting point to facilitate meaningful conversation with your kiddos. View books for your children by age group.

Rivers Edge Bank Simplifies Finances For Kids & Families With Trusted Banking Solutions & Resources

Teaching your kids and teens about financial literacy and money doesn’t mean you have to have all of these financial discussions at once, but gradually equipping your children with financial literacy is an invaluable gift. It empowers them with independence, builds their financial confidence and prepares them for a lifetime of sound financial decisions. Managing kids and money is a lot easier when the whole family is on board, not to mention when you have your neighbors at your local Rivers Edge Bank ready to help you learn and grow together. Take the leap and empower your kids to expand their financial knowledge by getting them started with a savings or checking account at Rivers Edge Bank.

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