Back to School and the ABCs of Talking Money with Kids

Back to school is a great time to teach your kids the ABCs of money. With lots of back to school shopping you have many opportunities. Don’t worry; tackle the easy topics first but keep the dialogue going. Whether you have children in grammar school, junior high, or high school, this is a great time to start talking with your kids about earning, saving, and investing money.

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A – Address the Topic

The first hurdle is to address the topic with your child. Address the topic of money directly but keep it casual and assess where your child is with their understanding of money. A good starter is to simply ask if they understand where money comes from. If they reply ‘you,’ it’s time to let your kids know more about how your family earns its living. Keep the topic fun, casual, and light. Don’t make this first step too complicated.

For the youngest child, introduce the concept of money and show them examples. Ask them if they know what it is, where it comes from, and what it is used for. It’s important to show them some physical money because many of today’s transactions are digital. For a junior high child, now is a great time to introduce them to earning money. Start with a simple example such as earning $10 per hour and talk to them about taxation. Show them how much they would truly receive of the $10 if their tax rate was, for example, 20%.  For high school kids a little math is good so take this exercise a step further. Have them pick an item they would like to buy and calculate how many work hours it would take to earn enough money to pay for the item after tax.

B – Beyond the Basics

For this step, you are going to take your child beyond the basics of understanding what money is, how it’s earned, and what it takes to earn enough to buy an item. Now is the time to instill good savings habits in your child. For your youngest, start by teaching them to save at least 15% of money they earn, even from their allowance. Withhold 15% of their allowance, gift money, birthday money, etc., and teach them it is for savings. Don’t cheat your child; put this aside to grow in a savings account and gift it to them as a surprise in the future.

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For your child that is in junior high or high school, they may already be earning money from a part-time job. If so, sit down with them and go over their pay stub and explain to them the taxes (and possibly benefit deductions) that are being withheld. If your junior high child only has an allowance, have them save 15% in a savings, money market, or CD account. For your working high school child, ask that they set aside at least 15% in savings; more if you can get them to do it. As long as your child has earned income, now is a good time to introduce them to a Roth IRA in addition to savings, money market, and CD accounts. A child with earned income is allowed to contribute to a Roth IRA. To inspire them, use an online Roth IRA calculator to show them how much their investment could grow by the time they reach certain ages.

C – Confirm, Check in, and Continue

Over time, confirm with your child that they understand the concept and value of money. You can also take this time to teach them that although money is important, it’s not more important than people or doing something they love in life. Confirm that they are saving and check in with them about how they feel about what they are doing. It’s also good to check in with your child as they save and learn about their goals. Get them to set a goal and continue saving and investing. Finally, when they reach the goal – celebrate!

The takeaway from the ABCs of money is to start a dialogue with your child and address the topic of money. Move beyond basics and help them to start investing and understand why they are doing so to instill good money habits for life. Get them used to saving at least 15% of everything they earn over their lifetime. Confirm that they are understanding the concepts of money and saving, check in with them about how they are doing, and encourage them to continue saving and investing for life.

If you need help or would like to know how to start, give me a call. As an independent CERTIFIED FINANCIAL PLANNER™, I can help you start a dialogue with your child about money and make this a profitable back to school year. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation #CFPPro #savemoney #retirement #backtoschool #childrenandmoney #saving