How to teach children about money and personal banking basics
Personal banking is an essential part of life in the 21st century, so it’s never too early to start teaching your children about money. The earlier you provide guidance on important financial topics, the sooner they will become financially literate and make the right personal banking choices and other financial decisions for their future.
Understanding personal banking principles early in life helps young people prepare to participate in the economy and avoid mistakes that can lead to deep personal debt and financial failure.
Gradually introduce concepts such as personal banking and financial responsibility to your kids. To get started:
- Talk about money when your children are around so they become familiar with personal banking terms and concepts.
- Start with the basics, such as counting and the value of different coins and bills.
- Build on simple ideas. Over time, introduce more advanced topics such as needs versus wants, budgeting, and income and expenses. Learning about money at a young age will help children better understand more complicated financial products such as credit cards, loans and investments in the future.
- Use learning opportunities. Teach children to run errands and visit stores so they can learn about money and become involved in the buying process. For example, they can check for weekly in-store specials or go through fliers to look for coupons for items on your shopping list. Check the cost of similar products made by different brands and discuss the differences.
Starting with the basics of money management when children are young can help them become familiar and comfortable with the basic ideas surrounding managing money. As their comfort level with managing money grows, young people will be even more capable of making the right decisions to fit their financial circumstances. Here are some guidelines you can use to talk with your children about money and personal finance at a variety of ages.
Ages 4 to 8
Introduce young children to simple concepts about money and personal banking.
- Take them grocery shopping to demonstrate how to use money to buy goods and services.
- Show how families have a limited amount of money to spend.
- Teach them how to divide allowances or other money they have earned. Help them learn that if they spend money on one thing, there will be less money available for something else.
- Talk about saving, spending, sharing and other financial goals.
Ages 9 to 14
As children get older and can understand more complex subjects, teach them how to create a simple budget for an activity or event such as a movie outing. One by one, introduce these ideas:
- the difference between needs and wants
- the importance of saving a portion (for example, 10 percent) of all money they receive and the value of an emergency fund
- the value of a savings plan for short-term and long-term financial goals
- the significance of regular financial commitments families have
- how families use household income to meet commitments.
Ages 15 to 18
In high school, give children more responsibility and stress important ideas such as:
- the pros and cons of different payment options such as cash, debit cards and credit cards
- different kinds of basic investments (savings accounts, stocks, bonds and mutual funds)
- the time-value of money (for example, the past, present and future worth of money) and opportunity costs
- the concept of “living within your means” and why it is important.
In today’s world, financial literacy is as important for young people as knowing how to read, write and do basic math. Expose your children to the core principles of money, spending and saving as early as possible so they can develop the skills they need to succeed in today’s marketplace.
For information on financial literacy and resources to help teach your children about money, come talk to the experts in personal banking in Mill Creek Utah at First Utah Bank.