Financial Development For Children
What is Financial Development
Money is earned:
Help your child grasp the concept that money is earned through work; it doesn’t magically appear out of an ATM or your wallet. Many parents reinforce family values by assigning children household chores as a necessary part of productive family life, but other "extra” paying jobs can be a great financial teaching tool. Lemonade stands, babysitting jobs, dog walking gigs, and other ventures offer kids the opportunity to see and appreciate the financial rewards for their labor.
Develop the habit of saving money:
Saving money is a habit, so start this practice early! Set the foundation for future financial security by creating a practice of saving at least one-third of all money earned or received. Children who learn to save early will continue to save as teens and adults.
"Needs Vs Wants”:
Ensuring that "needs” are met before splurging on "wants” is critical for future money management success. Have them use their money for some of the things they need such as school field trips and school supplies. Learning early in life that money must be spent on more than just "wants” will help kids develop a sense of balance and set financial priorities.
Money is limited:
Help them understand that there isn’t an endless stream of money to spend; it has a definite end so purchases must be prioritized. Tie this lesson in with the "needs vs wants” message and give your children the gift of financial balance.
Live Within Your Means:
Learning that you can’t have everything you want helps children determine what they really want. Allow your child to set spending priorities, encourage them to think about what they have before making spending decisions, and help them explore the benefits and consequences of various purchases. This skill will help your kids become savvy shoppers who can think critically and confidently as young adults.
The Inclusive Economy
Parents are key influencers of their children’s financial capability development. They are critically important in shaping attitudes, values and norms about money during the elementary school years. They are doing this whether or not they know it, as lessons are being imparted explicitly and implicitly.
Parents can start engaging with their kids about money, even if they don’t feel like experts themselves. In a recent report focusing on low-income families and their elementary school-age children, CFED found that there are three key areas where parents are imparting personal finance lessons: spending (which includes planning for as well as the act of shopping), saving and earning. These lessons tended to evolve naturally through everyday activities like shopping or everyday conversations, and tended to communicate broad concepts reflecting an attitude, value or norm about money — for example, spending money requires tough choices, delaying gratification to save and the importance of a strong work ethic.
Repeatedly talking through everyday financial decisions is a powerful way to get kids started on building financial capability. To help parents do this, the Consumer Financial Protection Bureau (CFPB) recently released an online resource called Money as You Grow. This site was originally launched through the President’s Advisory Committee on Financial Capability and grew in popularity to reach 1 million hits in 2015. In its new home at the CFPB, the site features activities for kids at different ages, conversation starters for parents to talk with their kids about money and information for parents about how their children develop financial capabilities in early childhood, middle childhood and early adulthood.