One of the most valuable skillsets you can pass onto your child is a knack for personal finance management. The sooner your child forms healthy money habits, the better. While it helps to lead by example, it’s also important to sit your kids down and talk openly about money, teaching important lessons along the way.
But talking about money with anyone, let alone a child or teenager, can be intimidating. To get an idea of how to start teaching these habits early on, we talked to a number of personal finance professionals to see how they share these lessons with their own children.
1. Play old school board games
“I am a financial planner and have children ages 6 and 8,” says Mindy Hirt, a Wealth Advisor with Argent Trust Company in Nashville. “I have added an ‘old school’ element to my lessons with them – Monopoly. They love to play it. My younger child gets to work on his math skills (making change when he buys a property for example) and my older son is picking up on some more nuanced aspects of the game like paying taxes, inheriting money and making timing choices on investments and cash flow needs.” The Game of Life is another board game that is packed with real world financial lessons.
2. Download online and mobile finance games
There are a number of online and mobile applications that look and feel like fun games to kids, but from the parent’s perspective are valuable tools for teaching personal finance lessons. The parents we spoke with recommend Save! The Game, Tykoon and Planet Orange as digital gaming tools.
3. Give them incentive to save
“As both a Certified Financial Planner and a parent, I advocate that it’s never too young to start saving,” says Chad Nehring, CFPR with Conceptual Advisors. “Our kids have a chore list, and they are compensated for chores completed satisfactorily. This ensures they do a quality job, not just a ‘lick and a promise.’ Then, I give them an incentive to save. Whatever they decide to save, we match at $0.50 on the dollar, just like a 401(k) plan. My oldest has figured out that this is worthwhile, and is costing me a lot!”
4. Teach budgeting with prepaid debit cards
“I’m a practicing CPA in the Boston area and have two kids who are now 15 and 13,” says Andrew Schwarz. “Last December, we set up the Amex Pass card for them. We funded the reloadable prepaid debit card with $100 as a holiday gift, and then add their $25 allowance each month to their respective cards. That’s all the money we give them now. If they want to spend more, they need to work and earn that extra money.”
5. Open a teen checking account
“We opened a teen checking account that I can watch and transfer funds to but he fully controls,” says Eric Heckman, a certified financial planner in California.
Parents can open an account for their teen at their own bank and show them the ropes of depositing and saving money. A handful of banks even have checking accounts built specifically for teens that help them view and understand their accounts online.