Good Financial Habits Start Young

For children, good habits start early — and that includes personal finance. Just like math starts with simple arithmetic and progressively gets more advanced, knowledge of good money management can grow from a few introductory concepts.

Yet, according to a survey by T. Rowe Price , nearly 70% of parents are reluctant to discuss money matters with their kids. And 61% of parents only discuss money when their kids ask about it.

Managing personal finances is a critical skill, so having those discussions and establishing savings habits when children are still young can have a tremendous impact.

Here are some tips to help you equip children (or grandchildren) with a bright financial future.

• Set an example. Children who consistently see their parents pay their bills on time and keep a budget are more likely to adopt those practices in their own lives. Sharing real-life experiences can prepare kids to take precautions and avoid mistakes with their money in the future.

• Make savings “real.” Encourage younger kids to collect spare change in a clear jar or container so they can see their savings grow. When they ask you to buy a treat, instead offer to put that money into the “savings jar.” Once the jar is full, children can count the money and use the funds to purchase something extra-special. As a result, they’ll associate a sense of excitement with savings — and they’ll understand that delaying gratification can lead to a greater payoff down the road.

• Have kids earn (and learn with) their own money. Kids will learn the value of a dollar better if it’s their own. Younger children who are paid a small allowance for doing chores around the house will understand the concept of working for money. Then they can spend their own money on some of the things they want. They’ll begin to appreciate what these items actually cost and will be more open to lessons about saving and budgeting.

• Get kids familiar with banking. Adults can make a trip to their financial institution an exciting event for younger kids. Let them in on the process — maybe even let them press the buttons on the ATM or help to fill out a deposit slip. They’ll feel included in adult chores and won’t feel intimidated by banking later in life. Even if you do most of your banking online, a “field trip” shows kids where financial transactions happen and how the process works.

• Establish their own accounts. You can open a simple savings account for children younger than age five with a few dollars. As they get older, they’ll already have an account they can add to. Another benefit is the arrival of the monthly statement: it’s a good time to take a few minutes and review it together with your child. The statement can provide practice on simple addition and subtraction, and gives you the opportunity to talk about savings, interest and other concepts.

Credit unions like Cinfed can be a great resource, offering prizes and rewards while supporting math, money management and life skills. For adults looking for additional help, the financial industry has plenty of online resources– many of them free. The earlier you start these habits, the more likely they are to last — and give your children the skills to succeed with their personal finances.