How to Raise Financially Smart Kids

Kids as young as age 4 or 5 can start learning good money habits for life. 

Financial health isn’t something that just happens, or that we learn when we reach adulthood. It’s a complex combination of habits, life experience, mindset, education, and beliefs, all of which begin when we are little. 

It’s never too soon to teach young children how money works and to help them form a positive relationship with saving and money management. The sooner you begin, the better headstart you give your kids on becoming financially healthy adults. 

Here are four tips for helping young children learn about money and become financially responsible.

Start saving young. 

Kids as young as preschool can start understanding how to save, and the benefits of savings are significant. By saving, young children learn the essential skill of delayed gratification—a skill so important, it’s an indicator of future higher SAT scores, lower levels of substance abuse, lower likelihood of obesity, better responses to stress, better social skills, and more. 

How to start? Simply and with a purpose—for example, to buy a present for a sibling’s birthday, or a new toy.  Help them determine a dollar amount for their goal. Let them add spare change, any allowances, or money from extra chores, and check in weekly on their progress. A simple glass jar will do for a bank, and lets kids visually see progress toward their savings goal.

Talk it up. 

According to a Chase Slate 2018 Credit Outlook survey, 83% of American parents say it’s never too soon to teach a child about money, but only 56% have actually gotten around to having those conversations. Talk openly and often with your children about money. Let them watch you pay for things with cash and credit cards, and explain to them how credit works. Above all, be positive when it comes to talking about savings—statements like “I feel so proud of myself when I save enough money to buy something I want,” or “I love saving money so we can go on vacation/I can buy things we need!” show a positive correlation between saving, reaching goals, and feeling good. 

Join a junior banking program. 

For most kids under 6, a piggy bank or jar is the best way to start. But many banks offer youth banking programs with a guardian or parent sharing joint ownership. (Be sure to find a program with no monthly minimums or transaction fees.) This allows kids to begin banking with the guidance of a parent, and eventually become financially responsible and independent young adults. 

Teach gratitude. 

How are thankfulness and saving related? According to research by Northwestern University professor David DeSteno, gratitude teaches financial patience. DeSteno’s research team conducted a small experiment where they asked 75 participants to write about a time they felt grateful, amused, or simply their typical day before answering questions that measured their capacity for delayed gratification. Those who reflected on gratitude showed greater patience and the ability to defer spending. 

Gratitude puts material wants in perspective—being grateful for a kind teacher, a beloved pet, a beautiful day helps kids cultivate a sense of abundance focused on wellbeing. Gratitude also helps lower anxiety about money by emphasizing all the good things you do have. A warm bed, a safe and cozy home, food to eat, toys to play with, cars to drive—all of these daily conveniences we take for granted are worth celebrating with children to help them remember they are safe and provided for. 

Tip: To help boost gratitude, make it a daily habit—have each family member share something they’re grateful for at dinner or just before bed. 

No matter what habits you choose to instill in your child, be consistent, be positive, and make sure there are tangible rewards for their efforts. Help them make plans to meet small goals and to enjoy the satisfaction of saving and understanding their money. 

If you could use more satisfaction and help meeting your own money goals, chat with a planner at Aspen Wealth Strategies to get started. 

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