In honor of the Month of the Military Child, here are some ideas to help our MilKids grow-up financially healthy at every age.
Toddler Milestone: Help your littlest ones understand that not everything they want is free, and some things (a lot of things) cost money.
Activity: While out shopping, talk with your child about how items in a store cost money and before we can leave with them, we have to buy them. Let them hand your money to the cashier for you and help you collect the change. Take this time to talk about items and activities that are free and not free. For example, playing at the playground with friends is free, but going to a movie with a friend costs money. Ask them if they can think of activities and items that are free and not free.
Preschooler Milestone: Counting Money & Good Savings Habits
Activity: Help your preschooler learn about money through playing bank or store together. Introduce them to different denominations of coins and bills, their names and what they are worth. Help them learn counting skills by showing them the different ways to count money such as 10 pennies equals one dime or four quarters equals one dollar. You can begin to discuss the value of money, that you need it to buy things, and that you can earn it by working. Have the “money doesn’t grow on trees” talk and help them learn impulse control by saving their own money in a piggy bank. Have them think of a special treat they’d like and once their savings goal is complete, help them go shopping to find their treat.
Kindergarten Milestone: The basics of Spending – Saving – Sharing
Activity: Set up spending, saving, and sharing jars for your child or entire family. Whenever they receive money either as a gift or if you give them loose pocket change, encourage them to think about how they would like to “budget” their money. The money they put in the spending jar can be used on small purchase they want for themselves in the near future. The Saving jar is for a bigger item or event that they will have to save up to buy. Try taping a picture of the item they want to encourage them to keep saving. Lastly, the sharing jar can teach children about charitable giving. Young children will enjoy thinking of a good cause to give towards and will take pride in delivering their donation.
Early Elementary School Milestone: Assist with Real Financial Decisions
Activity: Your elementary aged child will enjoy assisting you in making real financial decisions. Turn your next grocery shopping trip into a learning experience by having them clip coupons with you before you go, make a grocery list (so you don’t over-shop), or create a budget for your next foot shopping trip. At the store, give them a product to find and tell them to look for the best value. Explain what you do at the store to save money and find the best deals. Show your child how buying on sale, using coupons, or buying generic brands saves your family money.
Older Elementary School Milestone: Savings Accounts and Compound Interest
Activity: By the time your child is in elementary school, they most likely have their own savings account. If they don’t, take them to your bank and help them apply for a no-fee, interest bearing kid’s account. Encourage or set rules about how much of the money they receive for birthdays, holidays or chores should go into their savings account.
Older kids will be able to understand the concept of compound interest. For example, show them that if they have $100 and their savings account earns 5% interest (wouldn’t that be nice?), 100 x .05 = $105. The next year that same interest rate will earn them $5.25 ($105 x .05 = $110.25). The earlier they start saving (and don’t touch it) the more money they will save. Offer to match their interest on savings each quarter to help them stay excited about compound interest.
Middle School Milestones: Credit Cards
Activity: Take all the credit cards out of your wallet. Talk to your child about how you use your cards. This might also be a good time for some self-reflection if you end up having to show and tell a huge stack of cards! To kids, credit cards make buying whatever you want look easy. Explain to your child that every time you use a credit card it’s like taking a mini loan from a bank. You should only use a credit card if you have the funds to pay off your bill every month. Credit card companies charge interest on any balance that you don’t pay each month and that’s how they make money.
High School Milestones: Checking Accounts, Credit Scores, and Credit Cards (revisited)
Activity: During the high school years, parents have four years to teach real-life financial skills and supervise their kids as they give out more advanced financial responsibilities. Maybe you shudder at the thought of allowing your 16 year old to go to the mall with a credit card, but wouldn’t you rather they be educated about credit cards under your supervision and learn to practice “safe credit” now then when they are out on their own in a few years? Below are some financial areas that older kids need to understand before they are 18.
Checking Accounts: Help your teenage find a no-fee checking account. Most kids’ accounts don’t allow a checking account option, so your child might need to graduate out of the children’s account they opened a few years prior. Teachable moments include how to deposit and withdraw funds, writing checks (an ancient art), using a debit card, and consequences of overdrafts and fees.
Credit Scores: Most likely, your child doesn’t have any credit history. However, that doesn’t mean they don’t have a credit score. With no credit history, they won’t start at 300 (worst score possible) but they won’t have an 850 (best) score either. They will start somewhere in the middle-ish. Remind them that credit scores are a lot like GPAs…takes lots of hard work to increase them, but they are easy to wreck.
Credit Cards (revisited): If you think you have a responsible teenager on your hands, now is a good time to co-sign a card to help them build up their credit and gain an understanding of how credit cards work, especially under supervision. Although store credit cards have crazy high interest rates, it limits where your teen can spend, and you can keep a better eye on what they are buying. Before you help them apply for credit, show them how to get their free annual credit report from all three agencies. If they’ve never had credit but already have a file, something’s up and it needs to be disputed and corrected.
When your teen is released in the wild in a few years from now, they will be bombarded with credit card offers, especially on college campuses. It is especially important for teens to understand the trickery of minimum payments, and what a maxed out credit card will do to their credit score as well as their wallet.