Empowering Future Generations: Teaching Kids About Money

In today’s world, where financial literacy is key for navigating the complexities of life, instilling sound money management skills in our children is an invaluable gift. Teaching children about money is more than saving and spending; it’s about empowering them with the knowledge needed for financial success and independence.

By introducing financial concepts early on, parents can help children develop positive habits, such as saving regularly, living within their means, and setting financial goals.

Whether you have a child in elementary, middle, or high school, you can start teaching them now about money using these practical tips. We’ve also included some helpful—and in some instances fun—resources at the end of the article to assist as you work to educate your kids on money management skills.

Make Money Management Tangible
What does money look like? For kids, that’s typically notes and coins. But there are other types of money they can’t see, like digital money (debit cards, credit cards, gift cards) and online transactions. Try these tips to help kids visually understand physical money and how to manage it.

• Give your kids pocket money and gradually give them responsibility, e.g., paying for a toy or a phone bill. Make saving visual by using jars with a specific savings goal, such as games, going out with friends, or saving for the future. This can be an opportunity to discuss the trade-offs of spending versus saving and help them understand the importance of prioritizing goals.
• Show them how to use credit before they are old enough to get a credit card. For instance, if your child wants a piece of candy while you’re checking out at the grocery store, you can offer to buy it if they pay you back from their allowance. You can also point out when you are using a credit card, whether you’re buying new furniture or groceries, and show how the credit card bill is paid when payment is due. Later, as your child gets older, you can introduce concepts like interest rates and credit scores.
• Encourage your child to find ways to earn extra money, whether through chores, babysitting, or a small part-time job. Earning their own money can make saving more meaningful and teach valuable lessons about the concepts of money and work.

Build Financial Discipline
Figuring out how much money you have coming in and where that money is going is step one. More importantly, choosing how to manage that money and sticking to a budget while learning how much things cost will help teach the difference between needs and wants. Use these ideas to help get the conversation started.

• Teach them how to save and why it is so powerful with the magic of compound interest. The interest you earn on a balance in a savings account is reinvested, earning you more interest. Over time, this accelerates the growth of the account.
• Make it interactive. There are fun interactive games and apps that can be a great tool to reinforce these concepts and explain other financial topics. And, of course, don’t forget old favorites like Monopoly, The Game of Life, and PayDay.
• If you’re comfortable, you could include them in family conversations about budgeting. For example, when planning next week’s grocery list and budget.

Understand the Basics of Investing
Explain the difference between saving and investing, and provide basic information about stocks, bonds, and other investment options. While the intricacies of investing may be advanced for younger children, a foundational understanding will prepare them for more advanced financial concepts in the future.

• Start with explaining the differences between stocks and bonds and the costs associated with investing. Explain what risk versus reward is and how you can diversify an account.
• Grab their attention by teaching them how to research companies that speak to their interests. Show them how to explore the investor relations pages of different companies to learn more about what a company makes and how much it earned that year.

Equipping our children with sound financial knowledge and skills is an investment in their future success and well-being. By starting early, leading by example, and incorporating practical lessons on saving, budgeting, and investing, parents can empower their children to make informed decisions and navigate the complexities of the modern financial landscape with confidence. In doing so, we can help cultivate a financially literate, responsible generation capable of building a secure and prosperous future.

Resource Consulting Group is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Resource Consulting Group and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Resource Consulting Group and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Resource Consulting Group and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Resource Consulting Group and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.