April is Financial Literacy Month, providing the perfect opportunity to actively engage kids on the topic of money.
“Even young children should learn about basic money concepts, like saving for a goal and spending only what you can afford,” says Alison Summerville, business administration executive and head of Corporate Citizenship at Ally Financial. “Building an understanding of basic money skills and good savings habits at a young age can positively impact your children by giving them a solid foundation that they can use to manage their finances at every phase of their lives.”
This month and beyond, consider the following lessons:
Conceptualizing how money works can be challenging for kids, who may see you using credit or debit cards, buying things online, and even purchasing movies on televisions and mobile devices. Since many consumers rarely use cash, children may not realize when you are actually spending money.
Discuss the prices of various products and services. Explain how money can be spent only once, and that after buying something, a person needs to earn more money in order to buy something else. To teach this concept, play “grocery store” or other games that involve buying and selling items. Take turns being the cashier and the customer.
An allowance can be an opportunity to teach kids how to save. Having “give,” “save” and “spend” piggy banks is a simple but effective way to illustrate the three main uses of money and teach them about giving. Kids can practice math skills by tracking the amount saved for future spending on the things they want.
To maximize the benefits your child receives from saving money, you may want to consider a Uniform Transfers to Minors Act (UTMA) or custodial bank account. For example, those offered by Ally Bank, Member FDIC, require no minimum balance to open, and offer competitive interest rates and no monthly maintenance fees. When opening such an account, take time to discuss interest and other basic banking concepts.
Needs vs. Wants
Help your children learn the difference between needs and wants. Explain how you have to pay for needs like food, shelter and heat, before buying items that you want, such as toys and electronics. Help your children come up with a plan to save and spend their own money that takes into account their needs and wants.
Turn to free resources that your family can use to help teach kids financial concepts. For example, Ally, a digital financial services company, released “Planet Zeee and the Money Tree,” a book for parents and educators that uses a fun and futuristic story line to teach kids ages 6-10 basic financial literacy. Parents can visit allywalletwise.com to download the book and play “What’s Zeee Answer?” an interactive game where players answer questions based on the concepts covered in the book. Additional resources for all ages are also available at fdic.gov/moneysmart.
This April, take the time to plant the seeds of money mindfulness and boost your children’s financial knowledge.