It is never too early to start teaching children how to manage money, especially since the window for establishing good habits may be short. University of Cambridge research suggests spending and saving habits are formed in early childhood and are set by age seven.
Do not underestimate a child’s ability to understand money. We make financial decisions every day for our family, and children will only benefit from being part of the conversation. Whether you offer your children a three-jar allowance, or help them open their first bank account, there are many ways to include kids in the financial planning process. Here are some easy ways to teach children of every age, from your little one to your teen, about the importance of smart spending, saving and investing.
Pre-K to early elementary school
You can start teaching children as early as age two about finances by simply explaining that everything we buy costs money, from essentials like the food we eat to exciting new toys they might want. Let them be part of the process. When you go to check out at the store, allow kids to insert the card or hand the money to the cashier and explain the transaction of purchasing while doing so. These little steps help young children connect the dots and establish an early understanding of spending.
Elementary to middle school
At this age, you can give a child some money to manage while shopping, maybe $5. Explain to them that they can spend that money however they want while showing them tradeoffs—like getting multiple inexpensive things means you cannot get one expensive item or vice versa. As kids get a little older, you can also try hands-on activities as teaching tools. For the aspiring entrepreneur, consider starting a lemonade stand, and then helping them make decisions on what to do with the profits from his or her small business.
High school and beyond
When you are ready to move beyond the piggy bank, there are many options to consider when opening accounts for children. You can open a guardian account, where you remain the owner and your child could make the decisions. Another option is a custodial account, where the child owns the account and you control it until he or she reaches a certain age. If your child is earning income, you can open a Roth IRA or a 529 account in his or her name. Be sure to talk with your child about the responsibility of managing an account, and give him or her some freedom to make decisions (or some mistakes) on their own.
Whatever your approach to teaching financial literacy at home, it is important keep it fun and engaging. Managing your finances correctly is the pathway to future opportunities, such as buying a car or saving for college. It is important to balance any conversations with appropriate precautions, but the goal is to get kids excited about the possibilities that come with sound financial habits.
You can find additional tips and courses tailored to specific ages on Banzai, an award-winning financial literacy curriculum. To date, Atlantic Union Bank, in partnership with Banzai, has served 175 schools, 180 teachers and educated close to 6,000 students.
Nathalia Daguano Artus is the director of community development and reinvestment at Atlantic Union Bank. Her current role is to steward partnerships in philanthropy, community development lending and investments throughout the entire Atlantic Union Bank footprint. Her focus is to connect communities to flexible resources and opportunities in affordable housing, economic development and financial education.
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