Editorial - Start a new back-to-school traditionSome parents rely too much on a school to teach their children important life lessons. Including finances. With another school year just starting, parents should seize the opportunity to talk to their children about smart money habits.
Some parents rely too much on a school to teach their children important life lessons. Including finances.
With another school year just starting, parents should seize the opportunity to talk to their children about smart money habits.
This year, the Minnesota Society of CPAs (MNCPA) suggests parents start a new back-to-school tradition. It offers the following financial literacy tips to share with kids:
—Save from the start. Possibly the most important lesson you can teach your kids is why and how to save their money. If they don’t already have a personal savings account, help them open one and encourage them to make regular deposits with money earned from chores, an allowance or a part-time job. Work with them to create long- and short-term savings goals.
—Pay an allowance. An allowance gives kids a hands-on opportunity to manage their own money each week. Establish a list of chores or tasks they must accomplish weekly to earn their allowance so they understand money isn’t just given away.
—Develop a budget. Face it: Kids want stuff. A simple budget can help them map out how much they should save versus how much they have available to spend each week. Explain that the family household operates on a budget as well, just on a slightly larger scale.
—Talk about taxes. You don’t have to go into great detail about the U.S. tax code, but you can let them know that taxes are a fact of life. If you pay sales tax on your back-to-school purchases, that will provide a real world example.
—Teach priorities. Wanting something and wanting it right now isn’t just characteristic of the young. But you can reinforce wants versus needs, spending within your limits and spending according to a budget. If they have $20 in hand, but want an item that’s $25, help them map out a plan to achieve their goal without just making up the difference for them.
—Visit MoneyAsYouGrow.org. This new website was created by The President’s Advisory Council on Financial Capability. It provides parents with 20 key principles to discuss with their children as they grow. And when parents “drill down” into each principle, it provides concrete examples of how you can bring up certain subjects and discuss them effectively.
—Be a great example. It’s good to talk with your children about money and finances. But it’s even more important to act as a role model for effective financial management. Draw your children into discussions on money matters. As they grow, include them in family decisions concerning savings, budgeting, and spending when appropriate. This is a powerful approach. Financial literacy is one of the greatest gifts you can give your child, no matter what their age. The skills you teach them when they’re young will help them make sound financial decisions throughout their lives.