How to Raise Financially Savvy Children

Raising Financially Savvy Children: A Guide for Parents

Raising financially savvy children is more important than ever in today’s fast-paced, digital world. Teaching kids the value of money and how to manage it responsibly can have a lasting impact on their future success. This episode of Your Money. Your Mission., featuring Julie Granger, President of Junior Achievement Wisconsin, and Brenda Campbell, CEO of Secure Futures, offers valuable insights on how parents can instill financial literacy in their children from a young age.

Start Early and Normalize Financial Conversations

One of the key takeaways from the discussion is the importance of starting early. Financial education should be a part of a child's upbringing, just like learning math or reading. Julie Granger suggests parents can begin as early as five years old by introducing an allowance system that encourages kids to manage their money using three categories: spending, saving and sharing. This approach helps children grasp the concept of budgeting and prioritizing their finances.

Brenda Campbell echoes this sentiment, emphasizing the role of age-appropriate financial activities, such as setting up a "store" at home where children can use play money to simulate real-world transactions. This hands-on experience can help children understand the value of money and how goods and services are exchanged, especially in a world where cash transactions are becoming less common due to digital payments.

Model Good Financial Behavior

Children are constantly observing the behaviors of the adults around them, so modeling responsible financial habits is crucial. As Campbell points out, parents can teach their children valuable lessons by openly discussing financial decisions, such as why certain purchases are delayed or how they prioritize spending between needs and wants. These conversations, when normalized, make financial topics less intimidating for children as they grow up.

Granger adds that parents should share their household budgeting process in simple terms. For example, explaining that money goes towards necessities like utilities, insurance, and food can give children a realistic understanding of family finances. This transparency can also help kids differentiate between needs and wants, a foundational concept in financial literacy.

Encourage Financial Independence and Responsibility

As children grow, encouraging financial independence becomes key. One way to do this is by helping them track their spending habits. Campbell notes that Secure Futures’ Money Coach program has students track their expenses for a month, which can be eye-opening. Many discover that they spend more on things like junk food than they realize, which helps them become more mindful of their spending patterns.

Another important tool in developing financial independence is allowing children to take control of their finances through part-time jobs or small entrepreneurial ventures. Both Granger and Campbell highlight the growing interest in entrepreneurship among teens today. Junior Achievement, for instance, runs a young entrepreneur program where children as young as ten can learn how to run their own businesses. This not only fosters independence but also teaches them about the risks and rewards of managing money.

Avoiding the Pitfalls of Peer Influence and Digital Media

In the age of social media, children are exposed to a wide array of financial advice—some of which may be misleading. Campbell advises parents to keep the lines of communication open, encouraging kids to discuss what they see online. For instance, when her daughter received her first paycheck, it prompted a conversation about taxes and financial planning, turning a simple observation into a learning opportunity.

Parents should help children develop critical thinking skills when it comes to financial advice, particularly when peers or influencers present unrealistic money-making schemes like becoming a TikTok star or investing in get-rich-quick schemes.

Final Thoughts: Build Financial Muscles Early

Granger and Campbell stress the importance of building "financial muscles" from a young age. Just as with any skill, practicing good financial habits over time makes children more adept at managing money as they grow older. By starting early, modeling responsible behavior, and fostering financial independence, parents can set their children on a path to financial success.

In conclusion, raising financially literate children requires intentionality. By making financial literacy a regular part of family life, parents can empower their kids to make informed, responsible financial decisions that will benefit them throughout their lives.