As a parent, you’re entrusted with one of the most important jobs in the world. Raising a child. It’s not an easy task by any means, but it is one of the most rewarding things you can do. From their first steps to going off to college, you’ll have the opportunity to make a lasting impact on them.
One of the biggest impacts you can make is giving your child the gift of financial literacy. This starts in the early stages of their life and evolves as they grow up. By beginning in the early stages, you will work with them to build a foundation of knowledge that can be expanded throughout a lifetime. Not only will they know how to handle their own personal finances, but they will also be equipped with the tools to reach financial freedom. Throughout this article, you will find lessons to share with your child and how to incorporate these lessons into your everyday life so they leave a lasting impact.
Ages 3-6
In the early stages of life, your child begins to understand simple concepts. At this stage, you can work with your child to sort and count money. This can be done through “play money” or better yet, you can include them in counting money when you make a purchase. By letting your child help you sort and count money, they will begin to understand that money has value and we trade money for items that we value. Developing an understanding of money’s function at an early age allows you to stack on other basic lessons such as a need versus a want.
Ages 7-12
As your child begins their education, it’s time to introduce new lessons about money that build on their prior knowledge. These lessons cover budgeting, saving money, and earning money. One of the most effective ways to introduce budgeting is to include them in your budgeting discussions. By including them in a discussion about a grocery budget, they’ll start to understand how a budget works and can see how it’s used in the real world.
To introduce the concept of savings to your child, you can open a bank account for them with you as a cosigner. This gives them a place to deposit cash or checks given to them for birthdays, Christmas, etc. Giving them a place to save their gifts instills the lesson of saving money rather than spending money as soon as you get it. As your child grasps the concept of saving, you can introduce them to different ways of earning money. A great place to start is by explaining your job and how you’re paid. Once you’ve discussed different ways of earning money, ask them to brainstorm ideas of how they could earn money. By doing this, they will begin to consider a variety of careers.
Ages 13-18
In this next stage of life, your child enters their teenage years. The lessons taught during this stage are crucial for them to learn before becoming an adult. These lessons include investing, debt, and taxes. It is likely your child has heard the concept of investing money at this stage but may not fully understand what that means. To help them better understand, you can educate them about the different types of investments, the risks involved, and the purpose of investing. With your guidance, you could open an investment account for them and select investments together. Not only will your child invest for their future, but they will also learn how investing works in real time.
As your child approaches 18, they will soon have the opportunity to take out a student loan, obtain a credit card, and apply for an auto loan. Working with them to understand the concept of debt and its purpose will prevent them from making costly mistakes early on in their young adult life. During this stage, your child will likely have their first job. Along with their first job comes their first experience with income taxes. As your child receives their paycheck, they’ll notice it was less than the amount they earned due to taxes being withheld. By discussing the different uses of taxes, you can help your child understand their importance.
Whether your child is just taking their first steps or about to go off to college, financial literacy can be taught at every stage of life. Not only will the lessons you teach your child last a lifetime, they can be passed down to generations to come.
-by Jacob Young, AAMS®
Financial Advisor, RJFS
313 East 10th Ave. • Bowling Green, KY 42101 • Phone: 270-846-2656
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
Ben Smith Life Compass Financial is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
