Passing on lessons of good money practice along with all the other lessons that you are to impart unto your children can be tough, especially as their main interaction with money is seeing you spend it on food and toys. They don’t get to see the work that you put into earning it or the transactions you make to put some aside for a rainy day. It’s very difficult to start helping your kids with money, but there are many ways in which you can start to instil a savvy financial mindset as well as preparing yourself for a time when they’ll need more of it.
Here, we’ll be exploring the full stretch, from teaching your kids to be good with money to forging ways to make sure there’s money put aside for when they inevitably need a boost from their favorite bank – you.
Setting up saving schemes in-house
A piggy bank is always a great way to start, particularly if they’re the kind that can’t be opened. But a piggy bank can only really relay that saving can eventually turn into having more money for bigger and better purchases. You should aim to incorporate a timeline for savings to show your child how they can accrue money and at what time they will have saved up enough to buy what they want.
By drawing out a timeline that shows the dates on which they receive money as well as indicating the date when enough money will have been saved, kids can get a better grasp of structure when saving. By creating checkpoints along the timeline, your child can clearly see how far away they are from their goal, which adds to their own excitement about saving. We all know how difficult it is for lessons to stick in the mind of a child, but through this ongoing process of checkpoints and an eventual goal, the lessons of saving and patience have a better chance of taking root in the memory.
Set up a savings account for them
It is all well and good setting up a savings system at home, but creating a savings account in a bank means that your child can benefit further. By opening one of the specialized savings accounts for kids, they can benefit from the interest rate while still learning the benefits of saving. The best of these accounts will feature a high-interest rate, low or zero fees for the expectedly small amount being saved, and be fun.
The main element that you should look for in a savings account for your child is that there must be low or zero fees for having a small balance. Some savings accounts will charge customers who have a small balance or seek to open an account with an amount below the bank’s stated minimum. As your child is unlikely to have a very big balance most of the time, you need to make sure that fees aren’t gobbling up their cash. The experience needs to be fun for them to want to partake in it, and losing money certainly isn’t fun. Finding an account with a decent interest rate will also help to keep it fun by showing your kid that they’re making even more money by basically doing nothing but save.
Start saving for college
We all have college aspirations for our kids as we want the best for them, but going to college in the US is very expensive and can derail even the brightest of minds. So, while you’re teaching your kid the benefits of saving, show them that you lead by example by setting up a college savings account. Alongside their own savings account at home or in a bank, you can help to show them that the experience is very rewarding.
It is said that the best plans to leverage are the 529 college savings plans or the prepaid tuition plans. The 529 plans are general college saving schemes that let parents put money into an account for use on any school and can result in tax deductions, depending on what state you call home. The added bonus is that if you’re withdrawing to fund education expenses, the money will be exempt from federal income tax. The prepaid tuition plan allows you to lock in the current tuition rates and save for them rather than potentially end up saving for larger fees with the more flexible 529 plan.
Be open with your child about money
While it does take time for some things to sink in, kids aren’t stupid: if you speak to them openly and plainly about money, they’ll start to understand the logic behind saving. If you’re open about money with and while around your kids instead of trying to hide sensitive topics, they’ll become more familiar with how the system works. Excluding your child from discussions about bills, salary negotiations, new job wages, and anything else you’d usually hush-up about when someone walks in can lead to them not learning lessons about money and the need to save until much later in life.
Setting up savings schemes in-house, at a bank, and for the future of your child are all great ways to teach your kids early on about the importance of being money savvy. On top of this, be sure to allow your kids to be a part of financial discussions as it’ll help them to see both sides of the coin.
