In school, most kids only learn algebra, calculus, and
trigonometry but not how to budget, save or invest. The older we get, the more
responsibilities we have that make it challenging to focus on learning
financial principles, which is why it is key to start teaching kids healthy
money habits at a young age.
A lack of financial literacy can have real consequences. Recent surveys show that many adults still struggle with basic money concepts, and those gaps can lead to costly mistakes over time. Meanwhile, U.S. household debt continues to rise. Federal Reserve data shows total household debt has climbed past $17 trillion, with credit card balances increasing sharply as many families rely on revolving credit to cover everyday expenses.
Gregg Murset, Certified Financial Planner and CEO of
BusyKid, shares his tips on how parents can teach kids critical financial
skills at home and help their kids learn to be good money managers for life.
Learn to earn
Kids today are addicted to OPM—other people’s money—but they need
to learn to associate money with earning it. Chores are a great way to
introduce kids to the “earning it” mentality. Starting as young as five,
parents can assign kids chores or tasks to do around the house as well as a set
amount they will earn for correctly completing the chores. This can also help
prepare kids for the real-world responsibility of holding down a job and
earning a paycheck.
Spreading the dough
Setting boundaries with kids and letting them know they can’t just
squander all the money they earn on candy and knick-knacks at the store can
help them learn healthy spending habits. Any money kids make should be broken
up into three categories: spend, save, and invest/donate. Parents can discuss
with their child the percentage of money they can spend from the total amount they
earn as well as the amount they need to save and invest/donate. Parents need to
stand firm with the numbers or percentages that are decided, even when kids are
begging or crying for the latest toy or video game.
READ MORE: 9 ways to teach kids about money
There will be rainy days
Saving doesn’t seem nearly as fun as spending, but after witnessing
how Covid impacted people’s finances and the way inflation made prices
skyrocket this year, it’s a critical skill kids need to learn. Having kids put
a certain percentage or amount away from the money they earn from doing chores,
running a lemonade stand, mowing grass, babysitting or money given to them for
a birthday or holiday, can make a world of difference.
Investing is really saving (for your future)
It might seem absolutely crazy to introduce young kids to the
stock market and the practice of investing, but we all saw what happened with
GameStop and the other viral investing opportunities that have been plastered all
over social media. It’s important that parents step in and help teach these lessons
before social media becomes their child’s financial advisor. The stock market
doesn’t have to be a scary and overwhelming thing. Parents should have their
kids start slow by picking a company (or product) they use and are familiar
with for the first investment. Use an app like BusyKid, which can make the process easy and
allows investments as little as $10.
Borrowing has its price
Most kids think of credit cards as get out of jail free cards. Sit
down with your child and lay your plastic out on the table. Have an open
discussion with them that it isn’t free money and that you are having to pay
more for whatever item you just purchased on the card unless you pay it off
that month. With inflation the way it is, it’s important for parents to go in
depth when discussing interest and how it works with their child.
Tracking invisible money
Most kids just see their parents stick their debit or credit card
into a machine and then they can walk out of the store with their purchases.
They don’t understand the transaction behind the swipe. Parents can use their
own debit or credit card accounts to show kids what goes on behind the scenes.
Pull up your online account and talk to kids about the different columns on the
card statement as well as the balances. Also, there’s no better way to teach
kids these skills then to provide them with hands-on experience. Parents can
research the debit cards that are available on the market for tweens and teens
and set their child up with one to get used to “invisible money”.
Focus on needs, not wants
When it comes to learning to budget, recognizing “want it” versus
“need it” can save anyone a lot of money. The earlier your kids understand the
difference, the better they will be at saving money. Have them get into the
practice of asking “want it or need it” before each purchase, even while family
grocery shopping!
The co-founder & CEO of BusyKid,
Gregg is a father of six, grandfather of two, certified financial planner and
consultant who also became a leading advocate for sound parenting, child
accountability and financial literacy. Gregg is considered a pillar of his
Arizona community and has twice been named Chairman of “Smart Money Week” for
the state of Arizona and was the 2014 National Financial Educators Council’s
Financial Education Instructor of the Year.
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