Financial Tip of the Week from the Iowa Bankers Association:
As another school year comes to a close, the summer months provide a perfect opportunity for parents to proactively help their children establish a solid financial foundation. Each day presents all kinds of opportunities to talk with your children about spending money wisely and saving for financial goals. Parents can seize the teachable moments and turn them into financial lessons that make a lasting impact. Here are a few age-appropriate suggestions to help you teach your children about money.
· Ages 3-5: Begin teaching your child the value of coins during their preschool years. Talk about the difference between a penny, a nickel and a dime. Show them a $1 bill and start showing them how you use money to purchase items. Give your child a chance to put money in a vending machine to help them understand the value of money.
· Ages 6-9: Consider giving your children an allowance – even if it is just a few dollars each week – so they can to make decisions of how to spend, save and give. You may want to set a rule that requires at least some portion of the money to be saved each week. If you haven't already, take your child to your local bank and open a savings account. Then talk to your child about setting financial goals, such as saving money to buy a new toy. Encourage your child to save money to achieve his or her goal. On shopping trips, stress the difference between wants versus needs with practical examples. Explain that a bag of cookies is a "want" while a loaf of bread is a "need."
· Ages 10-13: Teach your children about compound interest, and get them excited about how their money can grow when they save and invest! Consider increasing their allowance while also giving them more financial responsibility, such as allowing them to buy their own clothes. Continue to encourage your child to establish financial goals, such as saving for a new bicycle or saving for college. You may choose to offer additional opportunities for your child to earn extra money by doing special chores or projects. Get your children involved in family meetings to talk about family finances. Establish a family savings goal, such as a summer vacation, and engage your children in tracking your progress toward the goal.
· Ages 14-18: Sit down with your teenager and establish a basic budget that includes any income from his or her allowance or part-time jobs as well as monthly expenses, such as clothing, entertainment, cell phone, gas, etc. If you give your teenager a weekly allowance, you may want to consider changing to every other week or monthly to simulate a "real world" paycheck. Take your teenager to the bank and open a checking account. Be sure to teach your teen how to balance the account and review the monthly statements. Encourage your teen to save receipts to compare with the statements each month. Above all, keep in mind that it's better for your child to make small mistakes while living under your roof than make big mistakes when they're out on their own.
Your efforts as a parent will be rewarded as your child develops an understanding of basic financial principles along with positive financial habits. And with a solid financial foundation, your child will be well equipped to successfully manage their money as an adult.
These tips are provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. The IBA serves it members by providing legislative advocacy, training, regulatory compliance and other services designed to enhance the ability of banks to serve their communities. Learn more at www.iowabankers.com.