As a parent, one of your jobs is to give your children all of the tools they need to navigate adult life when the time comes. Financial Literacy is a crucial part of ensuring that your child feels empowered by their finances and ready to take on life. Below are a few helpful tips to help you effectively teach your child how to manage their money and prepare for a successful financial future.
1. Celebrate opening their first savings account
Use positive, celebratory language when discussing financial practices with your child. Bring them to the bank to set up their first savings account, and whenever they get money over the holidays, or maybe an allowance bonus, make it a habit to go to the bank to deposit some of their earnings into the account. This behavior sets a precedent that saving is a positive habit that they should feel good about maintaining throughout their lives. When you’re ready to open your child’s first savings account, reach out to Mechanics Cooperative Bank to give your child a head start into a prosperous financial future.
2. Use your Family Budget as an Example
One of the easiest ways to begin a conversation with your child about personal finance is to have some transparency with them when it comes to your family’s budget. Kids can learn early in life that although they want that new toy immediately, that doesn’t mean they can just have it right then and there, or even at all. Families have priorities to save for, like paying a monthly mortgage, saving for college, medical bills, groceries, and more. All of these things are necessary and require a thoughtful budget to address adequately. Ask your child what their financial goals might be, and help them develop a realistic plan to budget, just as you have done for your family's goals.
3. The 50/30/20 Rule
This method is a great, simple way to start when it comes to financial planning and budgeting and applies to budgeting at any stage in life! It’s a simple to grasp concept that will make creating your child’s first budget easy. With the 50/30/20 rule, expenses are divided into three categories: 50% essentials, 30% personal expenses, and 20% savings. Under this plan, it is easy to understand how much of your paycheck can be responsibly spent in each area each month.
Managing money doesn’t have to be stressful. Let Mechanic’s Cooperative Bank help you create a financial plan that works for you and your family today!