Got Kids? Here’s How To Instill Healthy Financial Habits

Got Kids? Here’s How To Instill Healthy Financial Habits

Dave Abate, CFP®, Senior Wealth Advisor

Teaching children financial literacy at a young age can help kick-start a lifelong healthy relationship with money. To your benefit, there are an abundance of advisor-approved techniques to consider. Below, I have laid out a few of my favorite age-appropriate methods to encourage learning as your children grow:

1. 1. For children ages 5 to 9: Setting a good example can be powerful in building the foundation at this stage of life. According to a study done by the University of Cambridge*, lifetime money habits are often determined by age seven – making it important to foster a healthy relationship with finances at home, so your children can carry it into adulthood.To start, familiarize your children with coins and develop a reward system, like a see-through piggy bank, that will allow them to visualize their money growing. Guide them to create a tangible goal and help them save toward it over time. With a goal in mind, introduce your child to categorizing their money into spending, saving and gifting reserves.

1. 1. For 10- to 13-year-olds: At this age, it is crucial to teach your child the value of money. Consider assigning tasks or chores in exchange for an allowance – light housework, yard work, car washes, etc. You can also include them in purchasing decisions, and empower them to make smart choices with birthday gifts for peers or other expenditures that involve them. In these exercises, talk them through budgeting and priorities to refine their decision-making process.This may also be a good time to introduce your child to a savings account. With it, you can demonstrate the importance of building a nest egg, match their contributions to create a healthy balance and review the monthly statement together.

1. Teenagers age 13 and up: The teenage years are an ideal time to familiarize your children with investing. As they get older, introduce them to the market, explain what compound interest is and have them identify a few stock picks they’re interested in. Once they are comfortable, open an investment account on their behalf, match their contributions and regularly review the performance together.Another tip, if you’re providing an allowance, utilize a pre-loaded credit card to further teach your child about budgeting between payments. Additionally, involving children in negotiations can be good practice for the real world – yard sales can be a great way to get first-hand experience.

Teaching your child about finances can also be a good refresher for you, and open your eyes to new habits along the way. For more tips or information about healthy financial practices, contact your advisor at 216.800.9000.