By Brenda Ross-Dulan
If we want to set our kids up for future financial success, we need to start now. That’s the first rule of introducing our kids to financial education: The sooner we start, the better. Money management is probably the last thing on the minds of most kids — if it even registers at all — but there are concrete steps we can take as parents to help ensure that our children know how to think about money, including the importance of saving for the future. If we plant those seeds with care, they’ll take root and our children will be much more likely to achieve financial success later in life.
So, what lessons can we give today’s children and young adults to prepare them for financial success in the future? Today’s kids are much more likely to spend rather than save. Even parents who try to teach their children about finances, such as by giving them a regular allowance, might find their lessons overshadowed by stronger messages that come from advertising or from children’s peers. Unfortunately, by the time most young people graduate from high school, they know all about spending and very little about saving or spending wisely.
Consider these facts:
• American teenagers spend most of their income — about 21 percent — on clothing, followed by food (18 percent); accessories and personal care (10 percent); shoes (9 percent); car-related expenses (8 percent); electronics (8 percent); music and movies (7 percent); video games (6 percent); concerts and events (6 percent); other expenses (3 percent); books (2 percent); furniture (2 percent);
• most students devote about one-half or more of their earnings to discretionary spending on relatively short-term wants and needs; and
• teenagers spend about $100 billion a year, and children under 12 spend $11 billion a year, of their own money. They influence 75 percent, or approximately $165 billion, of their parents’ money.
Today, thousands of bankers, Wells Fargo among them, will connect with kids in classrooms and after-school programs across the country during the annual American Bankers Association’s Teach Children to Save Day. These efforts will help young people take an important first step in mastering their financial ABCs.
Parents play a crucial role in their children’s financial success later in life. Here are five tips for parents:
1) start early — before they even start school, children begin to understand the process of managing money;
2) set goals — have children write down things they want and what they cost. Teach them about making choices and saving;
3) pay a modest allowance – just a small amount can help children learn;
4) make a budget — start with three categories: spend, save, give; and
5) use free resources — check out your local library and the Hands-on Banking website, a parent-tested, parent-approved program available free at handsonbanking.org; Wells Fargo’s children’s financial success resource center at wellsfargo.com/resource_center/childsfuture; and the public library, which likely has a number of good books on the topic.
A tip for children ages 3-7: Take three jars and label them separately — “spend,” “save,” “give.” Help the children split up their money into each jar and watch it grow as they save and disappear as they spend.
A tip for pre-teens, ages 8-12: Create a short-term savings box. Have them choose something they want (perhaps a brand-name pair of shoes or a video game system). They will learn the value of saving when they save enough to purchase the item.
A tip for teens, ages 13 and up: Open a savings account for long-term savings. Have teens save a certain percentage for a few years to make a bigger purchase.
Parents should ask their banker for more ideas and advice. Their child’s long-term financial security is at stake. By starting early, they can help their child develop good financial habits that will last a lifetime.
Brenda Ross-Dulan is the southern New Jersey regional president for Wells Fargo, which provides free financial education programs without commercial content as a public service.
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