According to a recent Greenlight survey, about one-third of teens (32%) said that the #1 most important financial skill for their future is how to save money. “The best way to teach kids of all ages about money management is through an allowance,” says Jennifer Seitz, educational content lead at Greenlight, a family finance company on a mission to help parents raise financially smart kids. “Once kids have money to manage, they can begin understanding how to spend and also save.”
Keep reading for a look at how Seitz, a certified financial education instructor and a mom of three, suggests more specifically teaching kids about money by age.
“Starting as young as preschool, kids can learn the basics of money — like what it is used for, how we earn it, and how much things cost. Parents know that the cards we use to buy things aren’t magic money, but kids may not realize that on their own! You can explain that money isn’t unlimited, so there should always be a plan for how it is used. Talk through any money choices they might understand, such as how you’re choosing the best price at the grocery store or setting aside money for a fun treat instead of something else.”
“In elementary school, kids begin to understand that saving allows you to spend money on something you want or need in the future. And, they can begin practicing how to do it! Set a savings goal, like a new bike, and encourage kids to work toward it. This helps them get into a routine of putting money aside, and it also helps them learn the value of money. As they get older, they can learn about opportunity cost and understand delayed gratification. They’ll know that sometimes you have to wait for the things you want to buy. Greenlight can help. With Savings Goals in the app, kids can stay focused and motivated while seeing their progress over time. And with Greenlight Savings Reward, kids earn up to 2% on their balances.”
“Tweens and teens are ready for lessons in budgeting. Half of parents (50%) say that the #1 most important financial skill for their childrens’ future is how to budget and spend wisely. Around middle school, many kids have more independence from their parents and are spending more on their own. They’re also likely to be earning more money, and that brings an opportunity to talk about saving and thinking about the future. Adults often hear the 50/30/20 budget rule, which is a guideline to spend 50% on needs, 30% on wants and 20% for savings. For kids, those numbers could widely vary. They’ll likely have more money available for wants… and future savings. Greenlight offers Parent-Paid Interest, which is a great way to educate kids and teens about compounding interest. You can set an interest rate of your choice, of 1-100%, which would grow much faster than a traditional bank account and show the value of higher returns over time.”
“Once kids reach high school, they begin thinking more about their life after graduation and are making decisions about college, careers and financial independence. They may be making money at an after-school or summer job. With more money, they can take further advantage of saving through investments. 86% of U.S. teens are interested in investing, but 45% say they haven’t invested because they don’t feel confident or their parents don’t know how to get started. Greenlight’s investing platform enables kids and teens to use their app to research, explore and learn about the world of investing with expert analysis powered by Morningstar. With the money they have allocated to invest, they can propose trades, which go to a parent for approval. With fractional shares, investments can be made for as little as $1. Over $10 million has been invested on Greenlight so far. It’s a standard brokerage account held in the primary parents’ name, which allows families to invest together with no limitations or restrictions on how or when you can use your investment.”