It’s back-to-school season, and for kids that means new clothes, new school supplies and new schedules. For mom and dad, it means spending a lot of money. But as kids head back to school, there’s one lesson that they may not be learning: the value of money.
According to a recent Gen Z and Money survey released by TD Ameritrade Holding Corporation (NYSE: AMTD), more than half of Gen Z surveyed say they follow a budget, with a quarter (27%) following one carefully and another 26 percent following one, but not very closely. Financial habits are developed early, so it is important to educate kids about money now to help them establish good spending and saving habits for the future.
TD Ameritrade, Inc. (“TD Ameritrade”)* hosted a special webinar with Jim Fay, author of Love and Logic ® books including “Millionaire Babies or Bankrupt Brats?” In it, Fay emphasized that it’s important to set guidelines and start discussions about financial responsibility early on to help teach children how to make more responsible financial decisions later in life. An archived version of the webinar is being made available free to the public on TD Ameritrade’s online education center.
“Parents might not feel like they’re the best, most-knowledgeable source when it comes to teaching their kids about money,” says Carrie Braxdale, managing director, investor services at TD Ameritrade. “However, parents are still by far the most important source of financial education for their children, and they can use this influence to teach their children basic financial lessons. This webinar is a great resource to help them kick-start the conversation.”5 tips for helping kids establish good money management skills and become money-savvy adults:
- Create an Open Dialogue. An open dialogue between parents and children can make a big difference in their perceptions and attitudes toward finances. Share with them financial mistakes you’ve made or lessons you’ve learned. Use those experiences as teaching opportunities and get them thinking about their own financial habits.
- Teach them How to Save. One of the best ways to teach a child to save and to show them how to be financially responsible is to give them an opportunity to do it themselves. Opening a savings and/or checking account can help prepare them for financial independence and teach them how to manage that responsibility.
- Start a Weekly Allowance. According to Fay, an allowance can be a great way for kids to practice their money skills. A weekly allowance helps instill a greater sense of responsibility and understanding about spending and saving as well as needs versus wants.
- Learn to Say No. As parents, we love nothing more than to see our kids happy; however it does children good to set boundaries and limits and, more importantly, to teach them the value of a dollar. For example, if your child wants a tablet, rather than saying yes, outline the cost, how much she has saved and how much she still needs. For example, if it costs $500 and your child only has $200 saved, she still needs to save $300 more to get it. What will she give up to earn the additional $300 to purchase the tablet? How will she come up with the money? Your child will value the item a lot more if she has to work for it.
- Invest in their future: Contribute to a 529 college savings plan or gift a Custodial IRA. One way to demonstrate the importance of saving is by doing. Don’t underestimate the potential impact of helping a child plan for long-term savings goals such as college or even retirement.