Like many of you, I’m working from home at the moment and that means I’m spending more quality time with my 14-year-old daughter, Grace. As anyone with a teenager knows, there are inherent challenges involved with so much 24-7 togetherness! However, more than anything else, it has been gratifying to reconnect and to spend more time together than our schedules typically allow.
I decided to take this time at home with Grace as an opportunity to instill money values and teach personal finance basics while I have a “captive audience”. April is Financial Literacy Month and since financial education is completely absent from most school curriculums and scarce others, it’s important not to leave financial education up to chance.
Now, you might be thinking that this is a terrible time to be discussing money issues with your kids, with so much upheaval and uncertainty surrounding us. However, I would challenge you to flip that mindset upside down. Challenging times make for some of the best teachable moments, and there are many opportunities in our current circumstances if we look for them.
Though Grace probably knows a bit more about personal finance than others her age simply due to my line of work, these topics are all appropriate for a broad range of ages and experience levels, and I hope they’ll create meaningful and educational discussion points for you and your children, too:
Creating a Budget
Having a budget – and sticking to it – is Personal Finance 101. However, many people struggle with this step, and few include children in decisions about household spending. It can be incredibly eye-opening for kids to see just how many bills need to be paid every month, to learn the percentage of family income that goes toward needs, and how to set goals around your spending and saving. The simple act of having your kids sit with you as you review your budget for the coming month will provide a foundational lesson in the value of a dollar and proper money management. This is a perfect opportunity to demonstrate how a budget needs to be updated to reflect our new reality, updating expenses to include extra fees for grocery shopping services, shifting dining out expenses to eating in or having food delivered, and how to make sure that suspended expenses for health clubs or exercise classes turn into savings.
Distinguishing Needs Versus Wants
Inherent in any budget conversation is the need to cover your necessary expenses first, with secondary attention to your wants-based spending. This can be tricky for children, especially teens. After all, that new smartphone or the expensive tennis shoes friends are wearing may feel very much like needs. Giving clear examples they can relate to is a great way to drive home the difference. For instance, while appropriate clothing for school is a need, an expensive pair of jeans meant for one special occasion is a want. Having food to eat three meals a day is certainly a need, but the hip new pizza place they love so much is a want, too. Talk honestly and openly about the fact that many people get into debt by spending too much money on things they don’t truly need and sow the seeds of responsible spending early.
Understanding Credit Scores
Younger children may have a difficult time understanding the delicate nature of this important indicator of financial health, but older kids or teens with cell phones are generally ready for a lesson in credit. Walkthrough your family’s cell phone plan and explain that it’s a credit contract and that late payments will negatively impact your credit and damage your score, making it harder to get another credit contract in the future. Applying the lesson to cell phones – something they interact with daily – makes the concept seem more tangible.
Using Checking Accounts and Debit Cards
If your kids get an allowance or work at a summer job, it’s a great idea for them to have their own checking account and debit card. Though these things require a level of responsibility, they also offer so much in terms of learning about the differences between savings and checking accounts, the differences between credit and debit cards, how and why to track purchases, and more. If you’ve been teaching them about needs versus wants and proper budgeting, too, a checking account and debit card allow them to put money values into practice.
While there are many challenges involved with our current extra time at home, remember to look for opportunities in the midst of seeming chaos. Celebrate Financial Literacy Month by teaching your children important family lessons, building financial awareness, and sharing money mindsets and values that will prepare them for future financial success.