When it comes to teaching kids about money, the parents are … alright.
Nearly 63% of moms and dads have talked to their children about at least one major financial concept, according to a new Policygenius survey. Budgeting and debt were the most commonly cited conversation topics, followed by charity and taxes. Credit scores and insurance were the least-discussed money matters among parents and kids.
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Family conversations around financial literacy are important, even when children are still relatively young, experts say.
“The age to start is when children begin to show an interest in money and notice how items are purchased,” says certified financial planner Randall S. Lee. “The most important concepts are the fact that money comes as the result of hard work, it’s earned, spending must not exceed the supply of money, and building good savings habits.”
Allowances
Policygenius’ survey is based on responses from a nationally representative group of 1,500 parents with children under 18. It was conducted on Google Surveys from June 3 through June 6, 2019.
Over one in three parents give their kids an allowance, the survey also found. Nearly 60% of parents that give allowance pay their child less than $20 a week.
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There are no hard and fast rules about giving kids an allowance. (Ultimately, families can only dole out what they can afford.) But parents looking for ways to educate their children on money matters might want to consider doling out a small dollar amount.
“Paying an allowance is the first step towards instilling good money habits,” Peter Lazaroff, author of "Making Money Simple," says. “It also creates natural opportunities for meaningful money-related conversations.”
Policygenius found 49% of parents that forgo allowance had yet to discuss major financial concepts with their child.
Lazaroff recommends implementing a weekly allowance between $0.50 and $1.00 for each year of the child’s age. He uses the “three-container system” which serves as his son’s de facto first budget.
“Before we doled out any cash, we had Tommy pick out three containers to store his money,” he explains. “One for spending, one for saving and one for sharing with others that have less than us. When he got his first $1 raise on his fifth birthday, we explained the importance of allocating some portion of the raise to the save container, but let him decide how much.”
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Financial accounts for your kids
More than 47% of parents have yet to open core financial accounts, including checking or savings accounts, for their child.
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There are pros, cons and restrictions associated with setting up financial accounts for minors.
Many credit card issuers, for instance, won’t let primary cardholders add authorized users under the age of 15 to their account, for instance.
But opening basic financial products, like a traditional savings or checking account, for your child is another way to introduce them to the financial system, says certified financial planner Chris Chen.
“When my eldest got his first paycheck at 16 … he opened a Roth after I explained compounding ,” Chen says. “It was a totally awesome realization that set him on a savings track for a lifetime.”
Teaching your kids about money
Classic board games, like Life or Monopoly, can also introduce kids to important financial concepts, like real estate or saving for retirement. So can an old-school piggy bank, simple budgeting spreadsheet and kid-friendly financial apps, like Savings Spree, Bankaroo, BusyKid or Stockpile.
Looking to impart some financial wisdom to your progeny? Check out our full list of 50 fun ways to teach your kids about money.
Graphics and additional reporting by Hanna Horvath
