How do you remove financial stress from your child’s future?

If you could give one thing to your children what would it be? Good health, happiness, or would you give them a good future? The best thing you can give your child is financial education.

Education starts young

What is the proper age to start financial education?

We learn at different speeds, and through various processes so this won’t be a one size fits all. If you feel your child is ready, introduce them to the world of money, little by little.

Education starts young and as early as possible. The thinking capital your child can develop combined with the compounding time they will have gives them a strong financial foundation.

If you start financial education young your children will have the successful habits they need to remove money as an obstacle.

As parents, you need to have an active role in financial education.

There will come a time when your children won’t be so young. The amount of money we deal with as we get older only increases, so it’s necessary to learn how to manage small amounts.

Which means in less than 20 years, your child could be responsible for hundreds of thousands of dollars. At that point, it’s better to teach them now.

A world without money

Money is moving to a digital landscape. Eventually, we won’t have physical paper money.

It’s easy to spend digital money but hard to spend real money. When you spend physical cash, you feel the process of losing something. With digital money, there’s almost no emotion. You won’t have to go to the bank to pull out more cash. If there isn’t enough in your account, you can charge it to your credit card.

How do I start?

  1. Some financial education is better than none. You don’t have to teach them about the stock market, start small and build from there.
  2. Let your child choose with their money. If you’re always stepping in, your children will never learn. We don’t want them to see Mommy and Daddy as a bank.

How you start is not nearly as important
as when you start. Start today, or today
will always turn into tomorrow.

Talk about money

Money is a tool, used in exchange with goods and services. It’s no different than any other device. You wouldn’t use money in every situation, but with the right position, it makes a difference.

Like a shovel, you would use a shovel to dig a hole, but you wouldn’t use a shovel to tighten a screw. You should talk about money, often.

Talking about money gives you more power over it. Through these conversations you will discover good and bad habits surrounding money. Eventually you will identify what’s hurting you.

Put them on the payroll

Start with an allowance but don’t give them money for existing, you’re the one that did the work bringing them into the world.

Money can be earned, traded, won, and even inherited.

Pay your children for doing chores around the house. For me, I got a quarter every time I took out the trash. If I took the trash cans to the road, I got a whole dollar. A quarter may not seem like much today, but at five years old, I was rich.

Remember, for most of us money is earned.

Start their savings

Use a clear jar, and yes you want to use a clear container. It’s better if your child can see the money. This jar is for savings only, and money should go in this jar.

How much should they save though? In any venture, starting is where you should have the most focus on your objective.

You should coach your child to save at least 40% or to make it easy, half of what they earn.

If they earn a dollar, 50 cents should go in their savings jar. If it’s a dime, 5 cents should go in their savings jar and so on.

This savings jar will serve as their ‘first’ bank account. It’s essential that they learn not to dip into their savings.

Over time they will see this jar grow when it does. Point out the growth, applaud your children on their savings, and you can even set milestones for them.

If they save 10 dollars, you’ll add 10 dollars. Incentives, it’s important to play around with incentives so you can figure out what motivates them.

The savings jar is also an excellent place to start explaining compound interest. Give them a percentage of growth for their savings. Learning about compound interest and understanding, it gives two very different emotions.

If you’re going to school, you should be learning. If you’re saving money, save as much as you can.

The earlier you save the better but saving isn’t
always for growth. We should teach them to save for
emergencies because emergencies happen.

Spending Jar

Use a clear jar, again. You want your child to see the changes. The spending jar should be noticeably smaller than the savings jar because saving is more important than spending.

The spending jar will serve your child’s wants, not needs. If they want a $3 toy, they will pay for it out of their spending jar. Do not pay for it yourself, you have the money, but that’s not the point. The point is to teach them things cost money.

If they want a more expensive item, like the new Nintendo Switch, your child is looking at a $300 purchase. At this time, create another jar.

This jar is similar to a savings jar, instead of saving for emergencies. You’re saving to spend on something. You’re introducing the basics of budgeting. Write the amount on the jar, and let your child allocate their money.

It’s important to remember that you’re walking with them in this process. You should discuss with your children the importance of adding items in your budget or planning for larger purchases.

Explain how important it is to continue saving. We should still be striving to put 40% in the savings jar. The rest can go where we see fit.

But if we have nothing in our spending jar, we can’t spend. If your child wants to buy something, point to the container and say, “If you have enough.”

Set the example

Children watch our every move. They study everything
we say and do. Don’t ruin the education
you’re giving by setting a bad example.

If you spend on things you don’t need, your child’s wants will expand to stuff they don’t need.

Are your conversations about money, healthy? Don’t argue about money when you just told your children money isn’t evil.

Talk about the example you set with them, “Dad shops with cash, so he doesn’t overspend.” or “Mom uses a list so she only buys what she needs.” The more reinforcement you give, the more will stick with them.

Your life is the sum of your habits. Your children will learn about money whether you teach them or not. Better to show them than let them learn the hard lessons.

Teaching opportunities

When you open the door to financial education you open the door to teaching opportunities outside of money. You open the door to bigger conversations about character and how your children will use money to impact the world.

If you have more than one child then the opportunities expand, because when we teach it gives us a different understanding. By your teenager teaching your youngest, you’re giving your teenager more insight into their own nature.

I believe that if financial education alone were taught, it would give us more than necessary to navigate the world in our own interests. We would learn responsibility, good judgement, and decisiveness through our application of the knowledge.

Prepare them for credit

Now that we have them saving for a future, building good habits, and controlling their spending, we are going to teach them about credit.

This step can start as your child becomes a teenager. Once they hit the age of 18, they’ll receive credit card offers from everyone. Teach them the basics of credit.

If you’d like to play the bank as a parent you can, give your child the ability to finance that new phone or a new game system. Explain the terms of your contract and the interest that will incur. If they miss a payment, charge them interest.

You can explain to them the importance of staying within their spending means and paying the card on time.

This is your opportunity to plant a seed revolving around credit. When the bank gives you a loan, you receive the principal but never the interest. The interest is what’s added on with time. Credit teaches us that there is bad interest, just like there is good.

Emotional spending

Emotional spending is a big part of wants compared to needs.

Emotional spending will become an important factor with teenagers. During this time they are developing the connection between their emotional and logical system’s.

There will come a time where your child approaches you about the Joneses.

“Mom, Kenny’s parents buy him new toys almost every week.”

Gratitude is the answer to emotional spending.

Kenny may get new toys, but that means there are toys he doesn’t play touch. Kenny wasn’t taught the way you’re teaching your kids. Kenny’s parents give him everything. Later in life, Kenny won’t be able to afford any toys. His habits today will build his future tomorrow.

If you want to buy something, then wait, if you still want to buy it in a few days, make the purchase.

Challenge yourself

While giving your kids a financial education don’t forget about yours. Fill in gaps for your knowledge.

Your child won’t be ready to tackle the stock market, credit, or real estate but you can. Imagine if you were given a financial education that changed your relationship with money.  

Don’t use the excuse that you didn’t know, or no one taught you. Expanding your knowledge only helps their future. If you need some assistance, we have personal financial coaches available.

Top 5 financial apps for kids

Don’t rely solely on apps but this can be a great tool to use. If your child is spending time on a tablet or phone, make it productive. Because technology has become more of a communication tool for us today, an app will help strengthen your education.

  1. Renegade Buggies 🏃🏃

Renegade Buggies is an endless runner game, like Temple Run. Except this game teaches financial responsibility. Each level your character will collect coins while dodging obstacles. The object is to grab items from your shopping list, at the end of each level you’re able to check out and choose which things you keep. These items can be sold to purchase upgrades for your character.

This game is focused on saving money and was designed by the National Center for Families Learning (NCFL). This app is available for iOS and Android.

  1. Bankaroo 🏦🏦

Bankaroo is a virtual bank. The app was created to help kids track their money. It comes equipped with savings, checkings, and charity accounts. It also allows them to transfer funds to others in the family.

The app would is best used once your child has developed good habits. It was created by an 11-year old who wanted an app that could help other kids track their money. Bankaroo is available for iOS and Android.

  1. Savings Spree 🛒

This game teaches us how the day to day choices we make can add up. Kids can earn imaginary money to save for their short term goals. With a pick and consequence game, your child will play through real scenarios that could affect them later on in life.

Savings Spree is only available on iOS and costs $5.99 in the app store.

  1. Star Banks Adventure

This app is a matchup game similar to candy crush. The game includes lessons which are reinforced by quiz questions. The experiences include: setting goals, saving and spending, asset allocation, inflation, and diversification.

Star Banks Adventure is available on iOS and web for free. You can test the game yourself above.

  1. The Game of Life ⏳

The app based on the favorite board game. If you have the board game even better, this game teaches the pros and cons of certain decisions you’ll make in life. While college may give you more options, you’ll pay off debt as you traverse the board.

The Game of Life is available on iOS and Android for $2.99.

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The best time to plant a tree was 20 years ago, the second best time is today.

Kids are extremely susceptible to external factors. If you don’t teach them, someone else will. Using different visual que and explanations will help your child understand the context of money.

You may have not had a choice concerning your financial education but you have a choice when it comes to theirs. Technology has made it easier to accomplish financial education but it won’t completely cover financial literacy. When it’s our behavior, it’s a lesson we need to learn personally.

Financial peace is one of the greatest gifts you can give, so give it to the people that matter most.

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