Finance is not just a college course for business students; it’s a lesson every kid needs to understand. From elementary school to college, students can take these simple steps to learn how money affects their lives.
Open a savings account. What better way to learn personal finance than to open a savings account. With supervision, you can teach your elementary student how to count money, fill out deposit slips and track his or her savings online. If they want to buy something from the store, explain how making that purchase will affect their savings balance. While it’s too early for your kindergartener to balance a deposit booklet, they are able to understand how a larger savings balance can be rewarding.
Consider an allowance. Providing a weekly allowance to your children creates an opportunity to incorporate budgeting, saving and spending into their lives. Begin by letting your child choose whether or not to put a weekly allowance into a savings account. If they decide to spend their money, help them budget the amount they have to spend. To help your student understand the value of money, divide the item’s cost by the amount of money they receive each week. This will show the number of weeks your child had to work to buy that item. To go a bit further, explain sales tax and how that needs to be considered when making a purchase.
Take it to the store. Allow your middle school student the opportunity to do a week’s worth of grocery shopping for the family. Armed with a shopping list, coupons and cash in hand, begin your shopping trip together through the aisles of your favorite grocery store. While shopping, explain that items can be priced by the pound or at a fixed rate. Then allow your student to find the best price for an item on your list. You can explain the higher cost of brand names and compare that to the off-brand. Teach your student how to read coupons and determine if using a coupon would be cheaper than buying a different brand without a coupon. This exercise will help your child understand how to prioritize and budget when grocery shopping.
Show them the bills. Let your child open the utility bill the next time you receive it. Not only will it show the cost of keeping the lights on, but it will also help give a realistic expectation of a utility bill when living on their own in the future. If you feel comfortable, share your student loan bill with your child, so he or she can prepare for the costs of college and understand the importance of applying for scholarships at a young age.
Consider summer employment. Encourage your student to get a job to help save for college and pay for entertainment expenses along the way. This income will help show how income taxes work and how to budget newly earned cash.
Review the cost of education together. While your student may be on cloud nine after receiving his or her first acceptance letter, it is important to compare several offers, whether they be from community colleges, trade schools, local schools, private schools and out-of-state universities. Create a chart in Excel to show the cost of the first year of school and the approximate cost after four years. This will help your child understand the amount of money they will need to save and borrow for their chosen school. Understanding the financial expense of college can help your student choose a higher education path that makes financial sense for the future.
Set a plan to buy a car. Decide how you would like to finance your child’s first car by making a plan with your student. This is a great time to decide if you will be matching your child’s car savings or if your child will be making payments every month. In this planning, help him understand the costs of insurance, gas and monthly loan payments. Furthermore, encourage your child to review issues such as resale value and miles per gallon.
Pull their credit report. Encourage your student to pull his credit report from AnnualCreditReport.com for free each year to prevent identity theft and ensure an accurate credit report. A credit report will, no doubt, be the furthest thing from your child’s mind, but it will teach the importance of maintaining good credit. Explain how employers can use this report as a determining factor when hiring and how having good credit can create opportunity for lower interest loans and smaller deposits.
Explain the benefits of benefits. Before they graduate, students will need to be able to successfully weigh their options for employment. Help your student understand the financial benefits of a fully paid health plan and how a 401(k) plan can benefit their retirement plans. Additionally, compare the price difference between a job with and without benefits.
As you can see, financial education can be taught at any age. Help your child understand the basics of savings, budgeting, credit and employment benefits by incorporating these nine tips into their financial future.