When should you start teaching your kids about money? Early — because the skills and habits they learn now can have a tremendous impact down the road.
According to a Cambridge University study, children develop critical financial skills and habits by the time they turn seven. This includes understanding the principles of counting, earning, and exchange, but also habits like planning, conservation, and delaying gratification which set the foundation for financial wellness.
That means it’s never too early to get started, and it doesn’t have to be difficult. Here are some easy ways to introduce your kids to healthy financial habits:
Open a Savings Account
Opening a savings account for your child is an important step towards a financially fit future. Making deposits will help them get used to saving, develop delayed gratification skills by ensuring they can’t raid the piggy bank on a whim, and they’ll earn interest.
Not only that, but getting used to visiting a financial institution is a valuable experience — an opportunity to learn about the resources available while growing up and learning to and manage their own money.
Ready to open your child’s account? Parents or guardians can book an appointment online to save time at the branch. Here’s what you’ll need to bring to open a SESLOC account:
- Parent/Guardian’s valid, government issued photo identification (ex: Driver’s License)
- A second form of Parent/Guardian’s identification with his/her name on it (ex: Utility bill)
- Proof of address if different than on identification
- Proof of membership requirement (live, work, or go to school in San Luis Obispo or Northern Santa Barbara County, or current member’s immediate family) if not satisfied by identification
- Child’s date of birth and Social Security Number
- Parent/Guardian will provide signature for account
- $5 non-refundable membership fee
- $5 deposit to Share Savings account
Get Them Involved
Introducing an allowance teaches the concepts of income and ownership. Giving your child an opportunity to earn more, such as through earning exceptional grades or going above and beyond the expectations of their normal chores, can inspire an entrepreneurial spirit.
Help your child develop a budget based on the Save-Share-Spend philosophy. A portion of their income should always be allocated to their savings account, but what should they do with the rest? Discuss spending in terms of “wants” versus “needs,” and setting savings goals for the things they want to buy. And don’t forget to discuss sharing with others who may be less fortunate.
You can also introduce the concept of investing early on. A SESLOC Building Block Certificate can be opened with a minimum of $250, and deposits of $25 or more can be made at any time during the 1-year term. Opening a certificate is a great way to learn about long-term savings and delaying gratification — they can’t access the money during the term without paying a penalty, but the tradeoff is earning higher dividends. After the term is over, they can decide to access their funds or renew for another term. Certificates can also be a way for you to set aside money from time to time for far away expenses, like a down payment for their first car or a college fund. You can name your certificate after its intended use in Online Banking to make it easy to track your savings goals.
Explain as You Go
Every day activities can be teachable moments if you take a moment to talk about it and get your kids involved. Here are some ideas:
- When paying your bills, explain recurring expenses and how you plan for them in your budget. Mention how important it is to pay bills on time, or else you end up with late fees or even losing the service.
- Explain the basics of taxes when prepping for tax season or while out shopping. We have to plan to pay more than the sticker price because of sales tax, and money is taken out of our paychecks to pay taxes. Taxes help pay for important things we use every day, like roads, parks, schools, and emergency services.
- If an allowance doesn’t fit into your family budget, grocery shopping can be a great teaching experience. At the grocery store, talk about your shopping list and budget. They can get involved by helping keep track of the running total as you shop, or selecting items based on price. Put them in charge of managing coupons and calculating if a two-for-one offer is better than 15% off. You can also give them a personal budget each trip that they can use to buy something of their own, or save up for a future trip.
- Back to school shopping is full of flashy ads for things kids absolutely must have to start the new year off right. It’s a great opportunity to talk about the difference between “wants” and “needs,” and name brands versus generics. Make a list together and have a budget when you shop.
Make it Fun
Planning the next family game night? Classic board games like Monopoly and The Game of Life teach budgeting, planning, and strategy — all while having fun! There are actually countless board games, video games, and books geared towards teaching kids about money management, and since you’re already reading and playing together, simply add them into the mix.