Financial Education: Setting Children up for Success and Financial Freedom
Youth Month
Each year, the Credit Union National Association, and credit unions across America, recognize April as Youth Month. This is a time to come together to support and educate our community about the importance of saving and doing so early.
Why saving & budgeting is important.
It’s important to learn, identify, set, and reach specific/targeted goals.
Children are more likely to retain critical saving and spending habits that they can carry into their adulthood.
Children are more likely to problem solve, make smarter financial decisions, and avoid overspending and accumulating debt if they can master basic budgeting skills.
and MORE!
Where/When/What?
We know you’re probably thinking, “This sounds wonderful and all, but I don’t even know where to start?” . . . and we COMPLETELY understand. It’s not always easy to discuss finances, spending habits, or practical and appropriate goal setting with our kids, or even our own families for that matter.
Families come in all shapes, sizes, cultures, backgrounds, experiences, etc. and the definition of success can look entirely different from person to person and their individual experiences. A Greenlight study in 2022 found that nearly 3 out of 4 (74%) teenagers do not feel confident about financially related subjects. So where do we start? How can we speak to our kids about the importance of saving & budgeting money when statistical data of that magnitude exists and experiences and ideals vary from person to person?
It’s always best to start by having a conversation.
Talk about money and budgeting strategies openly with your children. A great example of an initial conversation would be ask what some of their short-term and long-term goals might be and find those moments where money can play a part in them obtaining those goals faster. Now obviously, if your 4-year-old lets you know that they have goal to swim to the moon and back by the end of the day- that’s not a reachable, realistic goal. But, if your 4-year-old claims that they would like to check out the new dinosaur exhibit at the museum close by, that would present a teachable moment of how they can earn that experience.
Another great conversation to have would be to explain the difference between a “want” and a “need”.
Ask your child what they think their wants are? And then explain the difference between the two. Short-term wants might be easier to obtain than long-term ones. Even so, setting, saving for, and reaching short-term goals will give your child the experience and perseverance needed to obtain those long-term goals. When looking at short-term goals with your child start a budget with them and keep it visual.
Save/Share/Spend
Depending on your child’s age, they may have income from multiple sources: parental allowances in exchange for completed chores, birthday celebrations, tooth fairy earnings, part-time job earnings, etc.
Saving: when your child earns money, it’s important to teach them to set some of that earned income aside for savings & future expenses.
Sharing: Teach your child to incorporate giving back and charity efforts into their budget (we recommend teaching them to save 10% of their income for this purpose). Discuss options with your child to determine which causes they may enjoy helping. Consider having them volunteer with that specific organization- it’s a wonderful visual representation regarding the value of money when it’s used in a helpful way that makes a difference.
Spending: The remainder of their earnings can go toward spending. Your child can make purchases they choose, but remind and encourage them that extra savings can help them reach their long-term goals faster.
Mirrors
Your fantastic kids are a reflection of YOU! They will imitate the behaviors, ideals, and principles that are modeled to them. One of the coolest places and easiest places for children to receive some of these hands on experiences is at a supermarket. Include them in your grocery shopping experiences- from making lists, calculating costs, calculating taxes, cutting coupons, making adjustments to the budget, and most importantly STICKING with the budget (don’t let them find you in those impulse sections ;) !)
Is budgeting easy? No, not always. Could your children benefit and find value in budgeting and learning from these decisioning experiences? ABSOLUTELY! Simply telling them that it’s important might not be enough for them to retain it, though.. They will absorb, and see it, in a more impactful way if they see you following your budget, too!
Make it fun- turn it in to a game! Make it motivating- praise those reached goals and continue to encourage through the missed ones! Make it make cents (see what we did there)!