By Banzai Financial Literacy
One of the most important things you can teach children is how to manage money and invest for the future.
The Three-Jar Allowance
To learn how to manage money, children need some money to manage. This can come from an allowance or from doing small jobs for friends and neighbors. As a first step, you’ll have to decide how much the allowance should be and whether it should be linked to jobs they are required to do.
A popular way to teach young children the concept of saving is to illustrate by using three clear jars that represent current expenses, short-term savings and long-term savings. Using jars makes it easy to compare spending and saving. If you want to encourage charitable giving, you can add a fourth jar.
When the jars fill up, open a savings account for their short-term and long-term savings. A savings account reinforces the power of interest compounding. Armco CU offers an incentive-based savings accounts for children and teens. Both programs reward kids with bonus money when they complete age-appropriate financial tasks.
Spending vs. Saving & Investing
Help kids decide how much to put in each jar. Track weekly expenses to figure out spending needs. Discuss budgeting and making adjustments. The goal isn’t to get it right the first time, but to be flexible and come up with a workable allocation of money.
Next, talk about money for short-term savings goals. Children’s goals vary based on their age and concept of time. Savings goals may include toys, sports equipment, electronic devices, special clothes or other big-ticket items. You may suggest saving for one item at a time and help them figure out how much they’ll need to save each week to reach their goal in a realistic amount of time.
Finally, be sure to encourage kids to set aside savings for a long-term goal, however vaguely defined. For some children, saving for college is meaningful. For others, the goal may be more tangible, like a car or vacation. As an incentive to put money into long-term savings, you might consider making a matching contribution by adding 50 cents or a dollar for every dollar your child puts in.
Opening Accounts for Children
When you’re ready to open accounts for your children, check out the full line of youth accounts offered by Armco CU. We offer Savings Accounts that reward kids and teens for learning about finances, Teen Checking Accounts, Teen Debit Card and Youth Certificates.
Disclaimer
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