It’s easier to spend money than it is to talk about it. However, teaching our children the basic principles of personal finance at a young age can help them avoid costly mistakes when they get older.
Knowing where to start can be difficult. Many people just don’t feel confident in their ability to understand and manage money. Even if they do understand personal finance, they might not have a strong track record of success when it comes to spending or saving responsibly.
Hawaii residents carry an average of nearly $6,000 in credit card debt and have one of the highest mortgage debt rates in the nation.
Nationwide, more than half of Americans have less than $1,000 in savings, meaning they’re just one medical emergency or car repair away from financial hardship.
Children need a strong foundation for making wise financial choices. Age-appropriate lessons help instill healthy financial habits.
ELEMENTARY SCHOOL
Younger children might not be ready to understand high-yield bonds or credit scores, but they can learn basic concepts of earning, spending and saving.
Teach your child that money is earned by giving him or her a small allowance for chores. Keep it in a clear jar that will offer a visual incentive to save as it fills with bills and coins. When he or she wants something from the store, remind your child that he or she will need to count out that money from the jar at home.
Take your child to a bank or credit union and open a joint account with no minimum balance or account fees. Encourage children to save half of birthday or holiday money and watch the account balance grow. Making this a habit early on will encourage the habit of saving part of each paycheck later in life.
MIDDLE SCHOOL
Teach your tween patience by allowing him or her to save for a bigger-ticket item, like a new electronic gadget. Have your child calculate how long it’ll take to earn it by putting away $5 or $10 a week.
Your child will probably be tempted by other items on the way. Let him or her make the decision when it comes to spending money she’s earned, but talk about the consequences of giving in to every temptation — paying for one smaller item now means putting off a larger purchase until later.
HIGH SCHOOL
It’s time to step it up with real-world lessons that will help your teenager be a smart spender and avoid the debt trap as an adult.
If you haven’t already, help your teen sign up for online banking. Show him or her how to check the balance and track purchases. If your financial institution has a mobile app, tracking purchases will be even easier.
Teach your teen about credit cards and how they work. Children see us paying with plastic frequently, but they aren’t often privy to what happens when the bill comes. Talk about how credit cards are not free money and how it should be a habit to pay off the balance each month.
Look for teachable moments to talk with your children about money, and they’ll be better equipped to make smart decisions when it’s time to manage their own finances.
Karen Ho is the financial educator at Hawaii State Federal Credit Union, providing financial resources and educating credit union members.
