With many schools still closed due to COVID-19, parents and children have been spending more time together than ever, which is both a blessing and a curse for parents juggling virtual schooling, childcare, and work simultaneously. However, it also presents a rare opportunity for parents to add something to this year’s curriculum: Money lessons.
Many kids don’t learn personal finance basics like saving and budgeting until they’ve started their first real job or are living on their own, and more nuanced skills like investing are often never learned at all. This is part of why Americans are dipping into their 401(k)s before retirement and have an average of $6,800 in household credit card debt. Despite being an essential part of everyone’s day-to-day life, financial literacy doesn’t get taught in school—a gap that we’re trying to fill at Albert, where I’m a certified financial planner and offer advice to twentysomethings who are taking control of their finances.
Volunteering as a tutor with the nonprofit Financial Beginnings, I’ve seen firsthand that even small lessons go a long way over time and can build a financially savvy mindset that kids carry through life. Whether you’re currently homeschooling your young children or stuck at home with your college-age kid, consider using this time as an opportunity to hone their money skills.
For young kids: Make the basics interesting
For very young children (kindergarten through second grade), focus on introducing them to two fundamental concepts: what money is, and why it’s important. Essentially, we need money to pay for things like their toys, their clothes, and their home. Try doing a show-and-tell with coins, dollar bills, and credit cards, and ask your children to explain how they are the same, and how they’re different. Consider contrasting real money with fake money from a game like Monopoly and explaining why we assign value to one and not the other. With children of this age, the key is to keep things fun and light. Use coloring books and games, or show them real-life objects that tie into lessons and help paint a picture. These techniques will keep your kid entertained and engaged.
With older elementary school kids in grades three to five, you can build on this basic knowledge and take it a step further. Explain that everything in the world has a different value attached to it, and how this translates into how much things cost (for instance, the cost of a toy versus the laptop they’re now using for school). Discuss why people have jobs and what your family does to earn money. Make it a two-way conversation by asking your children about what type of job they want when they’re grown up, or ask for suggestions for extra chores they could do around the house to begin earning their own money. I’ve also found that tying financial concepts back to familiar hobbies or interests—such as discussing how they use money within their favorite video game—will bring them to life and help them stick.
For older kids: Stick to useful tips for the future
Money becomes more relevant for your middle school and high school children, so start supplementing these lessons with real-life applications. Give them hands-on experience with money by providing a small allowance in exchange for doing chores around the house. Help them set up a budget by encouraging them to put a portion of that allowance into different savings buckets, which they can put toward that big-ticket item they can’t stop thinking about. Point out how money adds up.
Many kids get their first “real” job at this age—whether it’s working at a restaurant or bagging groceries after school—so practicing good saving habits matters even more. They’ll be earning a salary for the first time, and the temptation to spend will be high. Remind them to put away a portion of every paycheck toward their savings, which can also be a good opportunity to introduce them to banking. Show them how to open a checking and savings account, how to maintain a debit card without overdrawing from their account, and why accounts need to be monitored regularly.
For college-age kids and beyond, the significance of providing practical financial guidance as they begin to navigate life on their own cannot be overstated. Even if they’re not on campus, they’ve entered the world of adulthood. If they don’t yet have a credit card, help them sign up for one with low fees. Explain the value of building up credit while you’re young, but doing so responsibly, by paying off your balance in full every month and not maxing out your card. As your children begin to enter the workforce, make sure they’re educated about new financial responsibilities that will arise—such as how to do their taxes, or the importance of contributing to their employer-sponsored retirement plan (which millennials notoriously under-prioritize).
While you might not feel like an expert, you probably know more than you realize just from going through life experiences, whether that’s buying a house or finally paying off your student debt. The most important thing is to start having conversations about money and share the financial wisdom you do have with your children, and continue to learn and grow with them.
Mark Reyes is a certified financial planner with nearly a decade of experience in the finance industry. He is a financial advice expert at Albert, a financial services company, and an advocate for financial literacy. When he’s not volunteering to teach financial wellness around Los Angeles, you can find him working on his car with his rescue dog.