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Talking to your children about money when they’re young can help them make good choices later. PNC’s Jennifer Dempsey Fox shares tips for how parents can teach valuable financial lessons to kids of all ages.
Whether your kids spend money like it’s burning a hole in their pocket or consistently save it for a rainy day, having frank conversations about how they earn, save and spend money can be crucial for their financial success later in life.
“As a parent, money is one of the hardest topics to discuss with your kids, but it’s also one of the most important,” said Jennifer Dempsey Fox, a mother of two teenagers and national managing director of wealth strategy for PNC Asset Management Group.
Few schools have formal courses dedicated to money management—and it shows. American teens scored below average on global financial literacy assessments, according to a study by the Organization for Economic Cooperation and Development. If not improved, this lack of knowledge could lead to financial problems in the future.
The solution? Experts agree that as a parent, talking to kids about money is a good start.
Teaching kids the basics of money when they’re young helps them develop a good foundation. Then, when they’re older, it becomes easier to have more nuanced discussions.
These conversations become particularly important when your kids receive money for holidays, birthdays or special occasions and must make decisions on how they will spend – or save – that money.
Let Cash be King
Saving money can be an abstract concept for some children under age five. However, most children at that age are learning about taking turns and being patient. You can maximize these life lessons by explaining that patience now can help them buy something they want later.
Every time your kids receive money, encourage them to set aside some to spend, some to save and some to share with others in need. Asking them to designate their money in this way helps them think about both their short-term and long-term goals.
It may help to keep their money in clear containers so your child can see it adding up (or dwindling). There also are digital tools to help your child visualize this, such as PNC’s “S” is for Savings® account. Your child can “fill” three jars (saving, spending, and sharing) and see images of coins and dollar bills in the jars.
Giving young children cash to use for small purchases can make a difference. When they have to hand over a dollar for a treat in the checkout line, it teaches them that money is more than just a number. Remind your child that a dollar spent on a treat now means they won’t have that dollar to spend on a toy they have been planning to buy later.
Teach with Tech
Teenagers typically can handle more planning when it comes to their money, so it’s not as imperative for them to pay strictly with cash. Fox recommends loading allowance or gift money on prepaid cards.
“Paying with plastic means teens have to keep track of their balance and educates them on the modern money system,” she said. Since prepaid cards have a set limit, teens learn to budget their money to make it last.
When teens want to buy something, they can check the balance on their card before making a decision. “This method has prevented a lot of conflict in our house,” Fox said. “I ask my son or daughter if they have enough money to cover the expense and the answer is simple from there.”
If your teen doesn’t already have one, open a checking account for/with them. Keep in mind you may need to be a co-signer on the account if they are a minor. Teach them to use online banking to track and evaluate how they spend their money and emphasize the value of setting aside savings.
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WPO would like to thank PNC Wealth Management for providing this week’s sponsor blog content