Turning Kids into Money Masters

It’s never too early to talk about money. Early conversations with your kids can set them up for years of success. In this video, learn how to talk to your children about money and help them become pros.

Do you know what’s part of my morning routine? Packing these here top-notch lunches in hopes my kids don’t have to barter for a bologna sandwich on the bus ride to school. But speaking of kid-based capitalism, there’s something to be said for setting your children up for success when it comes to understanding money. And sure, carrot sticks and Capri Suns might not be the best currency around, but there’s more to talking to your kids about money than simply gifting them a piggy bank. So once an allowance comes into play and your kids officially have some legal tender to put in their Velcro billfolds, how do you ensure they know how to spend and save wisely?

To start, a good way to help your children understand the value of a dollar is to put it in terms they understand. Rather than positioning saving as keeping “fun money” out of reach on a semi-permanent basis, talk to them about what you maybe saved up for when you were their age. And sure, a three-disc CD-changing stereo might not be what they’re after in the 2020s, but you can still position it in a relatable way. As they reach for a candy bar at the checkout to spend their fistful of dollars, ask them if they’d rather save up for pizza night with friends or a new pair of kicks. These might seem like flippant or minor goals to you, but keeping things tangible and feasibly attainable is key to getting them on board with the notion of saving.

So how about actual financial tools? At what point is it time to get your child set up with their first official account? Thankfully, your credit union likely has a great entry-level savings option, even before they start that summer job and paychecks start rolling in. Make the trip to the credit union an event—let them talk directly to the teller and get a copy of their balance to take with them. Give them the agency to make decisions while banking, no matter how insignificant they may seem at first. Beyond allowances and after-school gigs, potential opportunities to earn some extra dollars can take the form of positive reinforcement that sets them up for good decision-making in adulthood. Say for instance that you explain how electricity is billed and let them know that if they are responsible for turning off the bedroom or bathroom lights before leaving for school each morning, the savings on the electric bill that month can go into their savings account.

Now here’s where things get tricky—what if your child asks about a credit card? The important thing is to start with a fixed balance—that’s where a debit or check card can really come in handy, as they can only spend what they have. Explain that they’ll have to keep track of their own spending through their credit union’s mobile app and keep tabs on whether they’re getting close to their balance. And a credit card discussion can perhaps be had once they’ve gone 6 to 12 months without any declines or overdrafts. You’ll turn them into responsible little accountants before the opportunity to incur credit card debt even becomes a possibility. In summary, the key to making your kid a money master is to emphasize value, tangible goals, and realistic consequences of bad habits. In fact, I’m just going to throw this in for good measure.