While every family deals with finances differently, most people agree that it is important for their children to learn how to manage money. Sadly, children are graduating high school without knowing much about credit, budgeting, school loans, taxes and more. Personal finance is one of the most important things a kid needs to know after high school, and they are not learning it while in school. Parents are the primary educators about finances, yet a lot of parents don’t know how to have conversations with their kids about money.
One of the main reasons we created BusyKid, is to help teach kids about money. There’s no better way to teach kids money skills than by allowing them to earn, save, share, invest, and spend their own money. Not only will you teach your child responsibility, but in time you will have a more financially literate child.
HOW SHOULD CHILDREN SPEND THEIR MONEY?
As a parent, it is your job to develop good spending habits in your children. BusyKid tries to simulate a real-life situation to help you do just that. One way we do this is by paying the kids allowance on each Friday. It is called “Payday”. Just like when you are working a real job, you will only be paid on certain days of the month.
Other ways that BusyKid creates a real life situation is by allowing kids the opportunity to decide how to spend their money. These are the same decisions they will have to make growing up… It’s called budgeting! Within the BusyKid system, children have four options on how to spend their money.
- They can save their allowance. On Payday the children's allowance money will be transferred from your bank account to theirs. The kids can choose to save it all if they would like.
- Children can share their money. BusyKid has researched and believes that donating money is an important part of basic financial principles and that kids should be doing this starting at a young age. Currently, it is setup to share 10% of their earnings per week, now that can be adjusted at any time in “Edit Allocation Settings”.
- They can spend their money. It is important for kids to learn the value of money. When they realize they have to do their chores for 3 weeks in order to buy that toy at the store, they will gain an appreciation for work and money.
- Kids can invest their earned money. Yes, your children can invest in a real stock. They can choose to put fractional shares of a real stock that will increase and decrease in value.
By allowing your kids to receive a regular allowance (based off the chores they complete) you are doing them a huge favor. Think of the things they can learn by the time they are 10 years old. Some teenagers won’t learn these budgeting skills until they can’t pay their rent in college.
HOW MUCH SHOULD A CHILD KNOW ABOUT MONEY?
If your kids are old enough to tell you to buy them things at the store, they are old enough to start learning about money. The key is finding teachable moments to share with them how to handle money responsibly. An example of a teachable moment would be if you are at the mall back-to-school shopping and are using a credit card you can talk a little bit about how it works. As they grow up, you will be able to have more in-depth conversations and ask what they understand about debit cards or loans.
When you are dealing with money in your everyday life involve your children in parts of those conversations. Asking them questions about what they think would be a smart money decision is a powerful tool. That critical thinking skill will go a long way when it comes to your kid’s finances.
Is Your State Making The Grade?
A recent study by Champlain College, painted a bleak picture of what our children are learning is school in regards to basic finance. In all, 26 states received grades of C or worse when it comes to teaching the basics of finance. If you are living in a state where your children don’t learn about budgeting, taxes, interest, loans, investing, credit or other financial topics, where are they learning it? See the entire study here: http://www.champlain.edu/centers-of-excellence/center-for-financial-literacy/report-making-the-grade