Feb 27, 2023
Top 8 money management skills kids can learn today to prepare for tomorrow
- Start teaching money management skills early to help your kids have a more secure financial situation in adulthood.
- Make learning fun and interesting to keep your kids engaged and wanting to learn more.
- Bring your kid into your financial world so they can see how these skills apply in real life as an adult.
Money management skills are a must when you’re an adult, and what better time to start building them than when you’re young and ready to absorb all the knowledge of the world around you? Teaching your kids valuable money management skills can help put them on the path toward financial success as an adult.
We highlight eight key money management skills any kids can master and ways you can ensure they stick to learning these valuable skills.
8 money management skills kids should learn
You can set your kids up for future financial success with the right money management skills learned early in life. These eight money management tips are great for getting your kids started handling personal finances like a champ and making good financial decisions!
1. Manage credit cards
Credit cards are a part of most Americans’ lives. Teaching your kids about how credit cards work can help them use cards to their advantage and avoid debt. Even if your child isn’t ready for a credit card yet, you can still let them learn through your credit card use.
When you get your monthly credit card statement, run through the bill with your child and explain to them what all the numbers and terms mean, such as the:
Minimum payment due
Also, explain how you can avoid interest charges and debt by paying the balance in full each month.
You can even show them how you pay the bill each month so they fully understand that just because you’re not paying cash at the store, it’s not free! You still have to eventually pay for your purchases.
If you have a rewards or cash back credit card, you can explain how the rewards work and their value. This will allow them to see the benefit of having a credit card and managing their debt responsibly.
2. Open bank accounts
A child can’t learn money management skills without... well... managing their money. This is where a kid-friendly bank account can play a role. You can set them up with a checking account and savings account where they can deposit their allowance, gift cash, and paycheck if they have a part-time job.
Another option is to sign up for a kid-focused banking¹ app, like Greenlight®, which includes a debit card and a Savings* feature.
These accounts will come in handy for teaching them many of the money management skills we discuss further down.
3. Set financial goals
As adults, we’ve got lots of financial goals to meet. We’ll spare you the full rundown, but these can include things like building retirement savings, putting aside a down payment for a house, or stashing cash to buy a new car. Your kids might not have such big financial goals yet, but you teach them financial planning by helping them set smaller ones.
You can help them set savings goals like having enough money for a new bike, a toy they’ve always wanted, the latest video game console, their first car, or the summer camp they want to attend this year. Then, help them set the date they need the money by and smaller goals along the way so they remain on pace to meet their goal. This will help them tackle what may seem like an impossible number in bite-sized portions.
4. Save a portion of their income
One popular budgeting approach — the 50/30/20 method — suggests saving 20% of your monthly income. You can then divide that 20% between your savings goals, your emergency fund or your retirement accounts, such as a Roth IRA or 401(k).
You can teach your kids how to pay themselves first by encouraging them to save 20% of their income. Of course, your child might not be ready for a 401(k) or IRA just yet, but they can get a savings account and treat it like one. Whether you have young kids whose main income is birthday money and an allowance or a high school-aged child with a part-time job, they can put a portion of the money into their savings account and turn this into a lifelong habit.
5. Build wealth
With your child now saving 20% of their income, what do they do with it? Make it grow, of course. You can teach them how compound interest and investing can help them build wealth over time.
The Greenlight app can help in both ways. First, Greenlight’s investment feature allows you to help your kids learn to invest in partial stocks and watch their wealth grow. Second, Greenlight’s savings feature includes up to a 5% Savings Reward*. You can also set up parent-paid interest to further teach them about the power of compound growth.
6. Hone spending habits
Developing healthy spending habits is important for sound financial management. Sure, money is meant to be spent in one form or another, but willy-nilly overspending can put almost anyone in a financial bind. So, teaching your kids how to delay gratification to determine if they really want or need the item they’re about to buy is an important money management skill.
Create a buying rule and stick to it. For example, for anything that costs more than 10% of the total amount of money in their bank account, they must wait three days before buying it as a “cooling off” period instead of whipping out the debit card and buying it on the spot. If your kid still wants the item after those three days, they can purchase it. If they forgot about it, then it wasn’t that important, and they have now saved that cash for something better.
7. Understand credit scores
While your kids may have a while before they start building a credit score, teaching them how they work is a great money management skill. When you review your credit report and credit score, have your child with you to review the different parts of a credit report and how they all combine to create your FICO Score.
You’ll also want to explain what a good FICO Score can do for you, such as getting loans for a home and car.
Have them review your credit report with you twice a year and explain what changed and why. For example, if you paid off a credit card that caused your credit score to jump by a few points, explain this to them.
8. Set a monthly budget
Another money management skill every adult needs and can learn as a kid is creating a monthly budget. Sure, your kids won’t have a pile of bills to pay monthly, but you can still teach them to earmark certain amounts of their monthly income for specific purposes.
Your kid likely has most of their needs met by you, so focus on budgeting for kid-friendly categories like:
Eating out: Such as for ice cream or fast food with friends
Entertainment: Like for a new video game or a movie night
Clothing and shoes: For those must-have items that are outside their normal school-shopping routine
Sports and hobbies: Fees for sports and clubs they wish to join or supplies for a hobby they enjoy
Each month, review their monthly budget and actual expenses to see if they hit their targets.
Tips to make money management skills stick
While teaching your kids money management skills is a great idea, it’s not really helpful if they lose interest and the skills don’t stay with them. Here are some tips to ensure they enjoy learning.
Make lessons fun
Make it fun for your kids to learn these money-management skills so they’re more likely to enjoy their lessons and retain them.
One option is to find ways to gamify their learning. For example, quiz them on credit scores and use their favorite treat or activity as a reward for getting a certain number right.
Track their progress
Motivate your child to learn these money management skills by tracking their progress. For example, if they set a goal to save 20% of their monthly income, make a chart of the months and place a motivating sticker on each month they succeed. Then, at the end of the year, they can “trade-in” their stickers for some type of reward. For example, trade in 12 stickers and get extra screen time for a month or trade 10 stickers for dinner at a restaurant of their choice.
Have periodic check-ins
Checking in on your child’s progress and offering regular guidance is a great way to keep them motivated. If they fall off track, explain that it is possible to start again and encourage them not to give up.
Instilling money management skills in kids sets them up for adulthood
Kids are never too young to learn sound money management skills and how to make good financial decisions. Sure, they don’t have the complex financial lives of adults, but they have brains that are eager to learn and the ability to learn valuable skills now and hone them as they reach adulthood.
The Greenlight app can help your child in building money management skills by giving them access to their own debit card and money app where kids can earn up to 5%* on Savings, and the ability to learn about investing. Give the Greenlight app a spin today and see how it can help your kids.
¹Greenlight is a financial technology company, not a bank. The Greenlight app facilitates banking services through Community Federal Savings Bank (CFSB), Member FDIC.
*Greenlight Core and Greenlight + Invest families can earn monthly rewards of 1% per annum, Greenlight Max families can earn 2% per annum, and Greenlight Infinity families can earn 5% per annum on an average daily savings balance of up to $5,000 per family. Only Greenlight Max and Infinity families can earn 1% cash back on spending monthly. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.
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