The Secret to Leading Children to Financial Success

I don’t know how many times I’ve heard or read people say, “I can’t believe schools don’t teach you how to manage your finances!” It seems like such an important skill that many kids lack today. Alas, it is up to us parents to take charge of the financial education of our children. Here’s the kicker folks, it doesn’t start in high school, it starts much earlier than that. There are many wonderful age by age guidelines that parents can get with a little research. I’ll focus on more big-picture concepts. Below are some simple steps to make sure your children know the value of money, the importance of saving, and the virtue of patience.

1) Start Early. My daughter had a piggy bank at 3 years old. At first, it was just a toy or decoration on her shelf. Occasionally, I would show her how to put coins into the slot, and the names of each coin with their value. Over time, she started putting coins in by herself, and knew each coin. It’s these early years where their brains are so impressionable, that we want to instill good habits. The simple act of placing a coin into a seemingly inaccessible place forces children to think about what the payoff is. That’s where you come in by educating your child starting with the next step. Depending on how your child earns their money, ie through an allowance, specific chores, etc., it’s also a great opportunity to show that work is required to earn money.

2) Don’t make it complicated. At first, it was more of a toy to throw coins into. Converting that toy into an ideology of financial strategy is where the parenting comes in. For me, it came down to spending time talking about coins and their value. That value can be translated into buying things they want. This instills patience because it takes time to save up enough for that toy, or book, etc. Make sure they don’t have their sights on something too expensive. They should see the benefit of saving after a few weeks.

3) It’s not all about saving, just to spend it later. There’s a great article by Laura Shin at Forbes.com where she suggests, “Create three jars – each labeled “Savings,” “Spending” and “Sharing.” The savings jar is for long term savings, the spending jar is for small “fun” purchases, and the sharing jar is to give to someone in need or to a charity. Overall, it’s these little steps that, over time, help to create a healthy respect for money. Believe it or not, this is their first budget! A more formal budget can be taught when they’ve mastered numbers and maybe some simple programs such as Microsoft Excel. Certainly after they’ve started their first job.

4) Start a savings account. I’m blessed to work for a wonderful Bank that serves the community with passion. When I mention I work for Middlesex Savings Bank, many times I’ll get a big smile with a story about heading into their local branch with their mother to open their first savings account. 30 years later and they’re still customers! It’s never too early to set up an account. I suggest a local Bank. One that’s involved in the community so when your children go to local events, they’ll see “their Bank”. They’ll take pride in their banking relationship. Again, it helps reinforce those values!

Many banks have fun programs to get children excited about saving. Middlesex has the “Fun Club” which offers a special prize for opening the account, prizes every time you make a deposit, and chances to win tickets to family fun activities. For more information please visit your local Middlesex Savings branch or check out our website at www.middlesexbank.com.

It doesn’t have to be a formal lesson plan, but start now with these easy steps. Bring up the topic of responsible financial planning early and often. Your children might roll their eyes now, but someday, they’ll thank you!

References:
Shin, Laura. “The 5 Most Important Money Lessons To Teach Your Kids.” Forbes. Forbes Magazine, 13 Oct. 2013. Web. 17 Aug. 2016.

Andrew H. Howard is a Commercial Loan Officer for Small Business at Middlesex Savings Bank in Acton, MA. He is a proud father of two and currently resides in Westford, MA. He is on the Board of Directors at the Greater Lowell Chamber of Commerce where he is on the Community Service Committee, and an Ambassador for the Middlesex West Chamber of Commerce. He received his bachelor’s degree from Suffolk University and is an MBA in Finance candidate at Assumption College.