Five Ways to Raise a Financially Savvy Kid
When it comes to saving money, I have two kids with two very different outlooks on their finances. One sees an expensive top in one of her favorite stores and has to have it and the other squirrels away his cash in a tiny shoebox under his bed.
In both instances, when money first started becoming prevalent in my kids' lives, my husband took both of them to the bank to open their own savings accounts. This year, he also taught our son about investing and even worked with him to invest some of his funds in a few of his favorite stocks -- one of which was the WWE. So far that hasn't panned out too well, but his decision to buy Barnes and Noble seems to be working out quite well.
While there have been times that both kids complain their friends seem to get everything they want from their parents, we have always tried to instill a work ethic in both of them so they appreciate when they use their hard earned cash to buy a pair of their favorite designer sneakers.
I think it's really important to set our kids up for financial success early on in their lives and the only way to do it is to show them how they can find ways to earn money, save money and budget for the big ticket items that they truly have their heart set on. If you are the parent of a teen or tween, here are five ways to get your kids on the road to financial success. It's working for us so far...here's hoping that our kids will become independently wealthy by the time we retire!
Five Ways to Raise A Financially Savvy Kid
Bring your kids to the bank to open an account: When they start receiving monetary gifts from family members or friends, instead of spending it all at once, take those checks and bring them to a bank where your child can open their very first savings account. Every time they receive a gift - especially if it's a check - encourage them to deposit it into their account.
Teach them about Budgeting for their Purchases: While my daughter seems to spend the money she makes, she doesn't overdo it. Usually, we talk about purchasing one or two things on a visit to the mall and we ask two questions: What does she need the most and what does she want the most? Typically, the items she needs, I will pay for. The things she wants are usually the items that she will purchase.
Next year, when she turns 16, she'll be looking for a job at a retail store. Sure, most of her paychecks will be going towards her school wardrobe, I still look at that as a plus since that won't impact my clothing budget for her for the year!
Introduce Your Kids to the Concept of Having Great Credit: In a recent survey conducted by Capital One, more than 80% of parents believed their kids will have better credit than they do by the time they reach their parent's age. I believe this to be true as parents share the "rules of life" with their kids, based on their own life lessons learned. In my family, we strive to pay our credit card bills in full every month, not only to avoid falling behind and keeping our credit score intact but also to teach our children, by example, how they should manage their personal finances in the future. I've recently teamed up with Capital One to bring awareness to Credit Tracker - a free interactive mobile/online tool that provides Capital One credit card customers easy and ongoing access to their credit score plus information that gives insights into what's driving it and how to improve it. Features include a credit report summary and report card, a credit simulator that shows the impact of everyday financial decisions on the credit score, and credit bureau monitoring that provides alerts that may help to indicate potential fraud (like opening a new trade, change of address or employment, etc.). Not only is this a great tool that helps manage your personal finance, it's also a great way to teach your kids about credit and how certain decisions can affect your credit score. It's vitally important to teach kids the value of not spending above their means at an early age so that they can enjoy the benefits that go along with having great credit.
Use Gift Cards as the First Entry into the Credit Card Experience: Before you give your child their first credit card, show them first how to consolidate their gift cards so they can utilize them for their own purchases. When my son turned 12, he had his heart set on a pair of pricey designer sneakers and decided he would pool his gift cards and use them to buy the sneakers. After tallying up all of the cards, he had about $100 to spare and he used some of his "shoebox" stash to fund the rest.
When it's time for college, it's time for a credit card: Hold off on providing your child with a credit card until they truly understand the concept of money. That typically happens when they head to college and might need additional funds when you're not around. Plus it's a great way to start building your credit history. However, it's important to look for a card that encourages good credit behavior such as the Capital One Journey card that offers bonus rewards for making on-time monthly payments. While you can transfer money into their bank account, they should be made aware that their credit card is for necessities and emergencies only. The card should also have a credit limit and you should aware on a regular basis when charges are being made so that you can stay on top of your child's spending so that it never spirals out of control. And if your kid feels they need more money, then it might be time for them to look for a part time job!
Please tweet me @rolemommy and tell me how you raise financial savvy kids!
I wrote this blog post while participating in a program on behalf of Capital One and received compensation as part of my participation. Sponsored by Capital One.