While the income of your children may be limited to an allowance and cash gifts for birthdays or a tooth fairy stipend, the importance of teaching children how to manage their finances cannot be overstated–especially since parents’ attitudes about saving and spending heavily influence their children.
A recent study found that a child’s attitude towards saving and spending is established as early as the age of five. According to “Spendthrifts and Tightwads in Childhood: Feelings About Spending Predict Children’s Financial Decision Making,” published in the Journal of Behavioral Decision Making, a child’s attitude about spending money and saving not only starts in early childhood but also influences their behavior regarding money for the remainder of their life.
For younger kids, lessons about saving can be as simple as identifying an inexpensive toy they would like and then helping them save for it by regularly putting a dollar or two into a piggybank or a jar. Taking the money they have saved out every now and then and helping a child count it is a good way to teach them about saving, as well as the need to be patient for something they want to purchase. As children age and begin to learn about numbers and values, it is important to take lessons about saving beyond the piggybank.
One of the best ways to teach children about electronic payments and financial responsibility is by opening an Alpine Bank online account with no deposit. In an increasingly digital world, children should be taught early on that electronic payments are the same as taking money out of a jar and using it to purchase something in a store. Parents can establish a bank account in their child’s name and help them access and manage it electronically. Whenever a child receives cash, they should be taken to the bank to deposit that money into their account and then shown online how that payment is electronically reflected in their account. Children should be shown how payments can be made from their bank account to online stores that will then send them the toy they have saved for.
As children get older, the sophistication of lessons about money should increase, from the importance of cost comparison for a purchase to the value of compounded interest and how credit cards and loans work. Once children are old enough, they should be taught about credit scores, the damage that irresponsible spending can do to an individual’s credit score, and how that can impact many areas of their life.
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