Why Financial Literacy Is Key to Saving Money
Follow-through is what turns a goal into a reality. Teaching kids about money works the same way. Yes, you’re educating them about spending, saving and debt. But the most important lesson in financial literacy for kids might be this skill: Envisioning a goal and then achieving it.
Here’s how you can start your kids on their financial journeys equipped with the tools they need to keep going.
Establishing a Strong Foundation With Checking and Savings Accounts
Money management for kids starts with opening a checking account through a bank you trust and linking it with a savings account. It also means talking about a subject that is taboo in many families – money.
Parents often shield their kids from knowing too much about household finances. Which makes sense. Money is one of the most important – and stressful – topics in adult life. But teaching kids about money means talking to kids about money. Turn it into a subject that your kids are comfortable and familiar with. That way, when it’s time to open a checking account with them, they feel prepared to take the next step with you.
Why Start With a Checking Account?
Our advice? Walk into a bank with your kids and open checking accounts for them. Explain that checking accounts are ideal tools for managing spending. Set them up with online tools and apps so they can check their balances or transfer money easily.
Show them how you use your own checking account, too. Take money out of an ATM and deposit money back into it. Whatever you do, make the experience encouraging and supportive.
How a Savings Account Complements the Journey
Next, open savings accounts that are connected to their checking accounts. That way, you can show your kids how to deposit money into a checking account and set aside part of it toward a savings goal.
Teaching Kids to Set and Stick to a Savings Goal
Once your kids know how to operate their checking and savings accounts, help them set realistic, long-term savings goals. Identifying something concrete that they want to work toward will help them feel proud of all their work when they finally buy it.
Picking a Savings Goal That Excites Them
Ask your kids about something they want, like a new bike or gaming system. Encouraging financial literacy for kids means helping them understand how to select a goal and work toward earning it through savings.
Breaking Down the Math
Remind your kids that saving takes time. Do the math with them to see how long it will take to reach their goals based on their allowance or income. Factor in sales tax, so they can learn another real-world lesson in money management.
Make sure they dedicate only one part of their savings to this goal, and keep money in their savings account as an emergency fund. Tell them that you hold yourself to the same standards of delayed gratification. Share with them some of the things that all adults should know about their finances. After all, you’re teaching your kids to become financially savvy adults.
Using Visualization Techniques to Track Progress
In some ways, teaching financial literacy for kids is easier today because so many resources exist that can help them visualize their savings journey and celebrate milestones. You can help them sign up for weekly progress updates through a banking app. Or keep a poster board in the living room that helps them see how they’re tracking their savings.
Tracking Progress with a Banking App
If your kids have phones, show them how to check their balances through an app. They could also check their accounts on your phone. Or you can set up your computer so they can log in to their account themselves. If you don’t want them behind a screen, head to the local library to check out books on money management for kids.
Creative Visualization Tools
Are your kids visual learners? Take an arts-and-crafts approach. Let’s say your kid wants to save up for a new bike. Buy a poster and draw a bike on it alongside vertical levels of savings, marked off in $20 increments. Every time your kid saves another $20, fill in another level of the chart. Keep going all the way up to the handlebars, so they can visualize their progress as deposits go up.
Celebrate Reaching the Goal to Reinforce Positive Financial Habits
This might be the most important part of this process: Celebrating success. If you turn savings goals into chores or a morality lesson, your kids will check out. Young kids do well with transitions when you sing to them or act playful and lighthearted. Older kids respond best to sincerity and mutual respect. Try similar approaches when talking to them about money. Make the fun age appropriate. Your goal is to help them think of money as a personal accomplishment instead of an overwhelming responsibility.
Making the Goal an Event
Turn the moment that your kids reach their savings goal into a memory. Withdraw the funds they need and buy the bike together, then go out afterward for ice cream or a family meal. Tell them how proud you are. Talk to them about what they’d like to save for next. Consider matching their contribution so that you can do something more ambitious together, like taking a weekend trip.
Building Future Financial Confidence
However you decide to encourage your kids, the point is to reinforce positive financial habits. You want to give them the confidence to earn money, transfer funds between accounts and save toward goals. Today, that goal is a bike. Tomorrow, it’s college. Later, it’ll become a house, retirement or a will that makes their kids’ lives even more secure.
Building Lifelong Money Management Skills
Habits formed early in life can impact our destinies. One of the best habits you can encourage as a parent is a sense of financial literacy in kids. Helping your kids refine their money management skills can help them set and achieve savings goals later on. And one of the healthiest ways to start that process as parents is to work with a bank you can trust, like First Horizon.
We combine the digital capabilities of a big bank with the personalized touch of a small bank. View our checking accounts here, and stop into a branch or sign up online so you can lay the foundation for your kids’ financial success. That’s a goal worth sticking to.
