It’s never too early to teach your kids about money. There are several key points to consider to make the task easier and more successful.
Income: Teaching kids where money comes from
As adults, we sometimes forget that the idea of income might feel foreign to kids. After all, they’re focused on grades, sports, their friends, and high scores on their latest video game. They’re not caught up in how much groceries or gas cost. But teaching kids about money helps shape the way they see the world.
Sources of income: A surefire way to educate your kids about income is to get them a worker’s permit for a summer or part-time job. If they’re not ready for a job, that’s okay. They could earn money through an allowance or by finishing chores. Encourage them to think of that money as income rather than as a source of instant gratification. When they receive their income, show them how to deposit it at a banking center or through a banking app, and then talk to them about the importance of saving for the future.
Planning for income variability: While you’re talking about income with your kids, think about discussing your own income with them. You don’t have to go over your exact salary or your retirement contributions, but you could explain that income and expenses fluctuate, so it’s important to adjust your budget and save for the unexpected.
Expenses: Teaching kids about monthly commitments
Teaching kids about income usually turns into a lesson about monthly expenses. Budgeting is part of everyday life – but it doesn’t have to be scary. Create a kids’ budget and show them they can plan small, fun activities with you: a youngster saves for ice cream while a teen may pay part of their cell phone.
Differentiating needs and wants: Ice cream is a want. Paying a cell phone bill is a need. Distinguishing between the two is a good segue into discussing how to pay for needs first and save for wants later. Emphasize that it’s best to spend and save in moderation.
Tracking monthly expenses: Give your kids the option of tracking money however they like. Maybe they like online banking. If so, set up an account for them so they can check their balance on their phones. Start small. The goal here is for them to feel comfortable managing their own money. Your kids can also sync their accounts with budgeting apps that help them set goals and see what they’re spending on. Or, if they’re more comfortable with a back-to-basics budgeting model, use the old envelope system. Label a series of envelopes for different purposes (“Ice Cream Outings,” “Cell Phone Bill,” and so on) and divide the income among them. Once an envelope is out of money, they know they’ve hit the limit in that category for that month.
Future goals: budgeting for long-term needs and desires
All of these lessons about income and expenses are intended to help your kids think long-term. What are the things they’ll need and want in the future?
Setting short-term and long-term savings goals: Back to that kids’ budget that you set up when you were teaching them about monthly expenses. Add another column to it: “Long-term expenses.” For younger kids, a long-term expense might be a bicycle. For teens, it might be car insurance.
Encouraging consistency in savings for kids: One way to reinforce the habit of saving is to open a money market account, a certificate of deposit, or a Roth IRA. Whatever investment vehicle you choose, help them invest in that fund. Show them how it goes up over time. And explain that it will eventually grow to the point where the money makes its own money.
Starting the financial journey with First Horizon
There’s a saying that goes, “The best time to plant an oak tree is twenty years ago. The second-best time is now.” Financial journeys last a lifetime, but it’s best to get started as soon as possible. Educating your kids about income, expenses, and future goals can help them handle money with maturity as they grow older. And it all starts with the right checking account – and the right bank.
At First Horizon, we combine big-bank resources like apps and online banking with the personal attention only a small bank can provide. And we do it so families like yours can access the capital and counsel they need when it matters most. Check out our checking accounts today – and set your kids up for success the rest of their lives.
First Horizon Bank is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. It’s the powerful tools you need with the personal service you deserve. Contact First Horizon for all your banking needs.
Follow KnoxTNToday on Facebook and Instagram. Get all KnoxTNToday articles in one place with our Free Newsletter. Comments may be sent to news@knoxtntoday.com.
