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December 19, 2019

Cultivating Healthy Financial Habits at Every Age

Cultivating Healthy Financial Habits at Every Age

You already know that you kid is an information sponge, so think about ways you can inspire your kid to learn healthy financial habits from an early age. Many learnings are through observation, so be conscious of talking about your own financial behavior in positive terms.  You’ll find that your kids often emulate you.  

How to Demonstrate Positive Financial Habits

Parents can talk about how they use their earnings to buy necessities and discuss savings goals.  Even preschoolers who are just learning their numbers have a basic understanding of value and trading items.  Hence, talk about how you would enjoy eating out as family at your favorite pizzeria but that you may limit the frequency so you can save money on a monthly basis to your kid’s college savings.  Then, couple this conversation with positive thoughts about your excitement for your kid to pursue their education and aspirations to become a doctor, scientist, or teacher.


Over time, kids become more aware money and use their addition and subtraction skills.  This is a great time to have them participate in making deposits of they receive birthday checks or money whether it is going to your local credit union to make a deposit in their savings account or having them observe online banking transfers to their 529 Plan.  Don’t forget to make it fun and have them do some of the work. Plus, talk in positive terms to help your kid feel good about the savings experience.

Mix Money Management into Every Dollar They Get

When they are young, it can start with putting every gift or earnings from their allowance or chores into buckets – spending now, savings, and perhaps sharing or giving away.  Some families divide these three buckets into thirds whereas others may set create their own unique system for distribution.

It’s hard to earmark all of that $20 their grandparents just gave them to future savings.  By letting them use the money to buy something they want at the store with a portion of the gift, your child will quench their need for immediate gratification as well as start to learn how much things cost.   You may find that your kid really wants a bigger item like the latest Star Wars Lego set then the bucket of funds from the latest gift and then may choose to wait to save more to have enough to buy it.

For savings, you may have one or more savings goals for your kids.  With college costs rising, many families encourage all their kid’s savings into their college savings account.  Other families may mix the savings into two or more buckets – college savings and kid directed savings.  For college savings, many families choose the tax advantageous of 529 plan.  For others, they have kid directed savings for short-term goal like buying supplies to create a go cart or medium-term goal like saving up for space camp.

For many families, charitable giving is a must.  If this is the case, then encourage your elementary school kid to share their money with others.  Perhaps this means putting money into the church collections basket. Maybe it means your child identifying a cause like global warming or wildlife preservation or organization like the local food bank or animal shelter that is meaningful to them.  

Having Their Own Skin in the Game

By having your kids participate in the process to save and making their own decisions about spending and money management, they are starting to take ownership of their own financial future.  As your kid gets older, they will have satisfaction in their financial role to help pay for large ticket items like college.  

Final Thoughts

Consider using interactive games that help with financial decision making.   There are a ton of different ones that you can find.  We recommend a free online financial education game geared for kids ages 7-12 called “Money Metropolis” from Practical Money Skills by Visa.  Players make life decisions that will affect whether their virtual bank accounts shrink or grow. 
 


Photograph of Colleen Krumwiede
Colleen Krumwiede
Co-Founder & Chief Revenue Officer

Colleen MacDonald Krumwiede is a financial aid and paying for college expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education.  She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.


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