Raise your hand if you only developed responsible spending habits after maxing out your first (or third) credit card? No judgement here - many of us didn't receive any kind of financial education growing up, but you have the power to change that by ensuring financial literacy is part of your child's life. After all, what good is building generational wealth if the next generation doesn't know how to responsibly build upon it?
Toddler
We'd be lying if we said we could get a toddler to sit still long enough to teach them the ins and outs of budgeting, but we'll bet they'll love playing with this
toy cash register, or if they're a little older, this
toy cash register, complete with multi-lingual microphone. Clean up on aisle four! Not only will they have hours fun honing their motor skills, but you can help them set up their own grocery store, helping them to begin to understand the concept of paying for things.
Kindergarten
By now your child is old enough to begin helping out around the house, keeping their bedroom tidy and earning a small weekly allowance. Get them excited about smart budgeting with this genius
savings bank! Talk them through the various things they could do with their money. They could
spend it on a small treat of their choosing next time you go to the store, they could
save it toward a bigger purchase, and they can
share it with those less fortunate or a cause that's important to them.
It's important to help them begin to understand how to make these choices for themselves versus allocating the money for them. For example, if your kid earns $5 a week, take them to the store and show them all the things they can purchase in the dollar section. Then show them some $5 dollar items, and then some $10 items. Explain how with a little saving they can treat themselves to a candy bar or something from the dollar section today, and still be able to put a little money away for that big ticket item. If they're saving up for something in particular, help them stay motivated and track their progress with this
free downloadable savings chart. When the time comes to make the big purchase, allow them to pay themselves, using cash. You can help them count out the money at the register. Using physical money helps to visualize the fact that money is finite, and paying themselves will instill a sense of pride and give them their first taste of what financial independence feels like.
Teach your kids the value of giving back by choosing a cause they care about. If they love puppies, empower them to make a puppy's life better by putting a small portion of their allowance aside for a local animal rescue, or purchasing a can of dog food when your local store has a food drive. Talk to them about the impact their donation has made, and ask them how helping others makes them feel.
Elementary School
Build upon their understanding of the value of money, by focusing on how to earn it. It's never too early to start that side hustle! A bake sale or a lemonade stand are great opportunities for your child to learn the basics of business, from making a product, to marketing and selling it. Hey, you could even break out that old cash register toy and ring up those sales for real. Cha-ching! If social distancing has put a damper on your child's entrepreneurial plans, you could always start a neighborhood contactless cookie delivery service instead of a bake sale. Help your child create flyers to put in neighborhood mailboxes with an email address where people can send orders or enquiries.
Now that they're earning the big bucks, if they don't have one already, it's time for them to open their own bank account. Make sure to drive home the idea that money is finite (a concept that even adults can forget in these days of Venmo and credit cards). If going into the bank to make their weekly or monthly deposit isn't possible, allow them to sit with you when you transfer the money from your account to theirs, seeing the balances change.
Middle School
It's time to light that fire under your little entrepreneur. As they get older and can take on more responsibility, the opportunities for earning money increase. Dog walking, or feeding the neighbor's cat while they're away are great ways to earn some money and have some fun. For the outdoorsy kids, some simple yard work can be a very lucrative side-hustle.
Teaching your kids the value of a dollar earned goes beyond financial literacy, it will also instill your child with a sense of responsibility, self-esteem and delayed gratification.
This is also a good time to talk about their future career goals and get them involved with their own college savings journey.
Scholar Raise has a savings calculator that can help you teach your kid about compounding returns. Encourage them to start contributing a small portion of their allowance into their 529 plan each month, and show them how $10 contributed every month can add up to thousands by the time they're ready to go to college.
High School
If you run your own business or side hustle, now is a good time to think about putting your child on the payroll. Not only will this help you out by taking some of the more mundane tasks off your plate, it's also a fantastic tax hack*. If your child is under 18 they can earn up to $6,100 tax-free per year. They earn money and you save on taxes, everyone wins!
According to the IRS, for this to be a legitimate business expense, the work must be appropriate to your child's age, so tasks like answering the phone and filing paperwork are ideal for a teen. Also don't forget that their compensation should be reasonable for the work that they're doing. Timesheets will help you keep your books above board, and will also reinforce the idea of an honest day's work for your child. Remember that, just as with any other employee, you will need to document the job and have an employment contract.
*Always check with your accountant before taking any business tax deductions.
If your child is old enough to be on payroll, they're old enough to learn about credit, loans and investing.
CalcXML has an assortment of calculators to help you illustrate exactly how much buying something on credit or financing something will really cost in the long run. Understanding interest is a key aspect to financial literacy, as it can either be your best friend (if you're earning it) or worst enemy (if you're paying it).
Once they have a grasp on interest and compounding returns, it's time for your child to see them in action. To get started, check our blog on
'Investing with Your Kids'.
Intentional Money University
If this blog has got you thinking about how else you could be saving for your child's future and teaching your child financial literacy, then you're in luck!
Intentional Money University is a financial literacy e-course for kids age 8-18, and the first three families who set up a 529 college savings plan through Scholar Raise by clicking on the buttons in this blog, will win a scholarship to Intentional Money University!
Rules:
- To enter, simply invite click on any of the buttons in this blog post and create a Scholar Raise 529 plan.
- The first 3 plans created will win a scholarship to the Intentional Money University e-course.
- Only open to residents of the United States.
- Winners will be notified via email.
