It’s back-to-school time again, when our children and grandchildren return to the classroom for a new school year of learning. While reading, writing, and arithmetic usually take center stage, other subjects are also important, such as personal finance. In fact, since around 2021, recognition of the importance of educating students about money and finance has burgeoned, and classroom requirements have been implemented by the majority of states in America according to the Council for Economic Education.
Personal finance coursework is now required by 39 states in order for a student to graduate from high school.
This is a much-needed development, but we think you should start younger than high school age. Even kindergarteners can begin to understand money concepts. While they might not be ready for an explanation about stock market risk, or what a 529 plan is, they can learn the basics about how money works if you teach them.
A great way to introduce children to how money works is to give them an allowance for age-appropriate household chores.
Once your child starts earning money, you can coach them on how to divide their money into “spend, save, and share” categories. You can use separate piggy banks for each category, label special envelopes, or use clear jars so they can see money building up. Any method that’s visual and understandable will work.
Here’s how it might break out.
THE SPEND JAR:
This portion is for immediate enjoyment or day-to-day expenses. Kids can use this money to buy things they want, like toys, games, or treats. They will quickly understand this category if they don’t already, and most children will want to spend all of it. This is where money concepts become teachable opportunities for you as a parent or grandparent.
THE SAVE JAR:
The save category is for money your child can put away for larger future goals that will take time to save for. If your child wants a toy that is more expensive, explain that they can save part of their money for that larger purchase. For instance, if the item they want is $20 and they save $5 per week, they can save and buy that toy in one month. You could even mark a calendar to count down the days. As they get older and more capable of delayed gratification, perhaps they will want to save for a musical instrument, or a car when they turn 16.
THE SHARE JAR:
This category is for money set aside for giving to others, whether through charity, tithing, helping someone in need, or just the sheer joy of gifting. Some parents or grandparents may want to teach that 10 cents of every dollar should go into this category for religious reasons. Or sometimes children might want to buy gifts for their loved ones on birthdays or holidays, or pay for an ice cream outing for themselves and a friend as a way to share abundance and fun. The share category opens a whole new dimension to money and what it can be used for.
But there’s more to learning about money than just the spend, save, and share jars. Other things you may want to consider include allowing your child to hand a cashier their money to purchase their chosen items to help them build confidence. Comparing price options between brands to help teach them about budgeting. Or making a rule that kids have to wait a certain time period before making toy purchases in case they change their minds. Other teachable moments might happen spontaneously, like if an item they purchased with their money breaks and what recourse they might have or don’t have with that purchase. You can also have a conversation about quality over quantity, and what really matters in life.
Another idea to consider for children as they get older is creating a “contract” for chores that is renewable yearly. That way, you can also teach them about taking on more responsibility, negotiating fair wages for work, and knowing their worth and value as they get older and can do more.
It’s also important to remember that your children learn so much by simply observing you. If you are demonstrating good financial principles in front of them already, they’ll naturally pick up on what you do and how it matches with what you say. This is why it’s important to make sure you keep up with your own financial health.
Through the years, you can start including children in more complex financial conversations. You can teach them about how to build good credit, what different types of investments are, risk versus reward, and what your plans are when it comes to your wealth transfer legacy.
We are here to help our clients grow and protect wealth, and pass on a tax-advantaged legacy you can be proud of. Contact us at any time to discuss your situation. We welcome the chance to speak with you. Bulwark Capital Management can help you stay on track, adjust as needed, and support you in making steady progress toward your financial future.
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DISCLOSURE
Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. Trek 26-142
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