Good money skills are like basic hygiene: It’s all about developing the right habits. The earlier you start, the more ingrained those habits will become.
That’s why it’s so important to start teaching financial literacy from an early age. Money skills like saving and budgeting don’t happen naturally. They need to be nurtured and practiced —ideally well before it’s time to launch your child into the world. If you’re not consciously teaching them the right habits, chances are they’ll form the wrong ones.
Here are five ways to get your child started on the right financial foot:
1. Start the conversation early
Financial literacy isn’t something you can impart in a single lesson or one-and-done lecture. It’s an ongoing conversation with your child that evolves as they get older and become capable of taking on more responsibility. Consider using day-to-day activities as teachable moments. Trips to the bank, store or ATM, for example, can serve as openings to discuss your financial values and approach to money.
It’s never too early to get started. Kids as young as two or three can start learning the names of coins and the basics of commerce. In fact, one study found that children form their money habits by the time they’re seven years old, so getting an early start may be more important than most parents realize.
2. Give them tools to practice with
Kids engage more in their learning when there’s something real at stake. By giving your child real-world tools for practicing their financial skills, you empower them to start making decisions and developing their own relationship with money.
OCCU offers several tools and products for teaching money management at any age. Kids twelve and under can participate in our Lucky Duck Savings program, an account that lets them set savings goals and watch their money grow. You can also open a certificate of deposit (CD) in your child’s name and use it to teach about longer-term, higher-yield investments as it (and your child) matures.
3. Get them involved
Kids love dropping coins into a piggy bank because it’s a tactile way they can participate in saving. By picking it up and shaking it, they can both feel and hear their money grow.
When you’re dealing with numbers in a savings or checking account, it’s a little harder to make the experience feel immediate and tangible, especially for younger kids. Letting a young child hand over payment at the checkout line or the deposit slip to the teller can help them grow more comfortable and confident with financial transactions. Finding creative ways to help them visualize the money growing in their savings account can get them curious about saving.
4. Set a healthy example
No matter how much you try to teach your kids, they’ll always learn more from what you do than from what you say. The most surefire way to ensure your kids develop the money habits you want is to practice them yourself.
If you realize your spending habits don’t align with the lessons you want to be teaching, it’s probably a sign that your own financial hygiene could use some cleaning up. Don’t be afraid to invite your child into your self-improvement journey; you can work on building better money skills together.
5. Teach the Spend, Save, Share plan
One way to impart sound financial values while teaching kids how to budget and save is to use the Spend, Save, Share plan. Each time your child receives money, whether it’s an allowance or a gift, have them divide the funds into three pots: one to spend, one to save, and one to share with someone else.
Decide what percentage should be allocated to each pot. For example, you might have your child save half, spend 30 percent and donate the rest to a nonprofit or a friend in need. The amounts aren’t important. What matters is that by the time your child reaches adulthood, they’ll be in the habit of saving a portion of every dollar they earn. They can even use the Spend, Save, Share framework to create their own household budget someday.
Money management skills some of the most important life skills you’ll ever teach your kids. They’re also some of the most commonly overlooked. Fortunately, you have us as your financial literacy partner. At OCCU, we’re here for our members — and that includes families that grow with us. Thank you for being a part of our community.