11 simple ways to teach your kids about finances

Key takeaways:

• Teach your kids lessons about money from an early age so they become responsible money managers.
• Allowances help kids understand the concepts of earning and spending.
• Encourage your kids to save their money and work towards big purchases.
• Show your children how credit works and the importance of paying off purchases on time.

Financial literacy is one of those important life skills parents try to teach their children to help them succeed in life. Unfortunately, there is no step-by-step game plan that will help children become responsible money managers. In fact, one in five 15-year-olds in the U.S. lack basic financial literacy according to the National Center for Education Statistics. 

It takes time and effort to help children learn the healthy money habits that will last a lifetime, but it doesn’t have to be difficult. By being candid, setting good examples and consistently talking about how money shapes your daily lives, you can help your child understand the world of finance.

MidWestOne bankers often help parents introduce their children to the world of banking and money management. Here are a few of our best tips to help you teach your child the importance of money management:

1. Set an allowance: Teach basic money management skills by providing a weekly allowance for kids. This could be based on good grades or completed chores.
2. Teach savings: Purchase a piggy bank or open a savings account for your children. Then, have them save a portion of their weekly allowance and periodically show how their savings are growing.
3. Work towards big purchases: When your children really want a “big-ticket” item, help them set up a savings plan that empowers them to buy it themselves. This will teach them about the value of money.
4. Show how you save: When using coupons or shopping for lower priced items, tell them about what you are doing and why you’re doing it. This helps them understand how to cut costs when shopping.
5. Talk about credit: Discuss the credit process and stress the consequences of not paying on time and how late payments will negatively impact your credit score.
6. Provide a secured credit card: These types of cards are like regular credit cards, except they require a security deposit against the credit limit. Some secured credit cards allow a minimum deposit of $200.
7. Review your credit report together: Show how you establish a credit history and proactively pull and check your credit report.
8. Get help with groceries: Give your child a set amount, such as $5, and have him or her decide which items to purchase. This helps them understand the cost of everyday expenses.
9. Start talking about college costs: As soon as they are in high school, start discussing college costs and how to finance higher education, including financial aid, scholarships, grants and student loans.
10. Explain wants vs. needs: Show how money should be used on necessities first and wants second.
11. Share your budget: Explain how much it costs to run a household and set an example with budgeting. When taking a vacation, explain how you saved for it.

By being transparent and discussing finances early and often, you can help your child learn the basics of money management and set them up for future success.

If you’re interested in opening a savings account for your child, the MidWestOne team can help. Stop in to see us at any of our locations.

MidWestOne Bank does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Member FDIC