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April 1st marks the beginning of both National Credit Union Youth Month and Financial Literacy Month, so there's no better time to find resources to teach your child about money!

Passing along your experience and insight is one of the greatest gifts you can give your kids. This is especially true when it comes to supporting their financial literacy. Building a strong financial foundation from an early age will help set them up for success throughout their lifetime. Here are four areas to focus on.

1. Earning

Money has to be earned. It’s a fact of life for most of us, and a key concept you’ll need to instill in your child from a young age.

Even very young children can understand the concept of working to make money. You can give your little ones the opportunity to earn pocket money by completing extra chores around the house, which helps them develop a work ethic and understand the concept of delayed rewards.

For middle schoolers, encourage any entrepreneurial aspirations they may have. Many older kids and teens have launched successful babysitting careers or provided lawn care and snow removal services to neighbors. Older teens can apply for jobs at restaurants and retail establishments, which usually offer flexible hours around students’ schedules.

You should also discuss future job opportunities and earning potential with your children long before they start to approach college-age. Talk to them about their interests and passions, so they’ll be thinking long-term when it comes time to choose a college major, vocational training, or other career path.

2. Saving

Learning how to save is an essential component of financial literacy for kids. As adults, having an adequate emergency fund can be a lifesaver in a financial pinch. Start teaching your kids to save for a rainy day from early on by encouraging them to save their allowance and birthday money.

Give your young children a piggy bank, or even better, a glass jar where they can watch their earnings accumulate. Then, bring them into the branch with you to open their very own youth savings account. You can help them make regular deposits, and you could even offer to match their savings with your own funds to give them an incentive to save.

Also, as their math skills improve, talk to your kids about the magic of compounding. Show how the interest or dividends they earn on their savings can steadily grow over time, especially if they start saving early in life and continually add to their savings.

Make sure you talk to your teens about their savings goals and how they plan to achieve them. Start making them responsible for some of their expenses, such as a class trip, prom festivities, or their portion of the family phone plan. And of course you’ll want to help them understand the importance of saving for college, if that’s the path they’re planning on. 

3. Spending

Along with learning how to earn and save money, children need to learn the discipline required to spend money responsibly. This is key to building greater financial security in the future.

Show them how you prioritize needs over wants to ensure you have funds for the family’s necessities, like housing, bills, and groceries. Be open about your financial situation and why it’s important to stick to a budget. You can also include older teens in discussions about the family budget so they can understand where most of the household income is going. You can even complete this worksheet together to see how your household budget works.

When young children ask for a small treat or toy at the store, you can explain to them that it’s not in your budget and give them the option of buying it themselves with the money they have earned. You’d be surprised how many kids change their mind about the item once they realize they have to buy it themselves!

Shopping together is also a great way to teach your school-age kids how to comparison shop and get the most value for what you’re buying. Showing them that you are cost-conscious and can wait to get a great deal will help teach them about the concept of delayed gratification.

When it’s time, help your teen open a youth checking account and help them with the responsibilities that come with banking.

4. Borrowing

As your child approaches adulthood, they’ll need to learn about loans and credit, and how responsibly borrowing money can help them afford life’s biggest expenses, like a car, college education, or house. This is something you can introduce long before your child is eyeing their first car or thinking about college.

For example, if your child is younger, and wants a toy that’s beyond their budget, you could offer them a small advance on their allowance. They’ll need to understand that the money they owe will be repaid from future allowance money (or by doing extra household chores). This is a great way to reinforce the idea that a loan is not free money – it’s a responsibility.

If you and your teen are looking at colleges, make sure that cost is factored in. Your family’s specific financial situation may bear heavily on the decision, so be clear with your future college student about how much you can contribute to their college tuition and expenses, and make sure they understand that they will need to pay the difference themselves, whether by working, saving, or relying on federal or private student loans. Encourage them to analyze their options and choose a cost-effective school to minimize their future student loan burden.

As your teen demonstrates more financial responsibility, consider adding them to one of your credit cards as an authorized user. This will allow them to start building their credit history and give them a head start on a good credit score. Clearly communicate your limits for using the card, and explain to them how you avoid paying interest by paying the balance in full every month. Be sure to monitor your account activity to ensure they’re using their card responsibly.

Supporting Financial Literacy at Every Stage of Life

At American Heritage, we are committed to helping kids of all ages learn how to manage their money. We have a variety of youth accounts designed for different age groups to help children prepare a brighter financial future. Also, be sure to visit our online financial wellness platform, The Learning Center, to learn about the financial topics that matter to you and your family.