A Mom's Guide to Financial Literacy
By Ruchika Tulshyan
Financial habits are formed at childhood. In fact – if you’re not educated on how to handle finances early on, it could result in lifelong risky money behavior, according to Feleathea Hyde, First VP at SunTrust Investment Services.
“You raise your children to have good manners and be disciplined. Being financially literate is just as important as those behaviors.” By creating good financial habits early on, she says, children have the potential to be confident and self-sufficient as adults.
Here are Hyde’s nine tips on how parents can best teach their children about money:
- Figure out how your child can “earn money.” The most common way is to let them “earn” it by doing chores. But if you are uncomfortable with that, establish a value on “super-chores” – chores they are not already doing. “Assign a value to their hard work. They won’t take money for granted this way,” she says.
- Educate children on the realities of the world – debt and going broke. Children are perceptive and will commit these lessons to memory.
- Emphasize the difference between long and short-term savings. Teach your kids that long-term savings are for emergencies, while short-term savings can be used for big-ticket items, like an expensive toy or bicycle, for example. Highlighting the difference between savings will get them into the habit of saving early.
- Both parents must have a consistent message when it comes to finances. Hyde says, if one parent talks about being financially prudent, while the other allows the child to spend recklessly, the child grows up confused.
- Help them understand the concept of “wants vs. needs” early on. Even in adulthood, not being able to differentiate between the two can lead to debt and even bankruptcy.
- Demonstrating daily financial activities can be even more beneficial than talking to children about finances. Between the ages of 5 and 7, Hyde says it’s wise to explain money concepts while drawing cash from an ATM, paying bills or while grocery shopping.
- Open a savings account as early as when your child is 7 years old. This allows them to see how money “grows”. It also instills a sense of financial responsibility as they spend “their” money, not “yours.”
- By pre-teen age, show children how to bank online, and pay bills using internet banking. Also this you can use this as an opportunity to write physical checks in front of them, and explain the basics of managing their money.
- Hyde’s most important tip? Remember, kids learn by example.
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