My friend Ashley sent me an email wondering about teaching your children about personal finance.
She received a promotional email from ING Direct, touting their savings accounts for children: Open an account for your kid, get a $10 bonus. Woo. (I’d hold out for more. $10 is puny, and since you have to use their social security number, they wouldn’t be able to get more bonuses from that bank probably ever).
Ashley wondered if it would be good for kids to have a checking or savings account, and if so, at what age? Or, what about using cash instead of electronic money?
I don’t know. My kids are so little, that my lessons about money are “do not put it in your mouth.”
Johnny vaguely seems to understand that things cost money, some things are “expensive” and some things “aren’t on our shopping list,” and that Daddy goes to work to earn money to pay our bills and to buy us things. He brings up the money topic from time to time, and we discuss things on his level. At least, that’s my intent.
I plan to use real and play money as the kids get older, so they can learn the basics. I haven’t decided on whether we’ll do an allowance, but I do plan to give them plenty of opportunities to work with developing money skills.
As far as checking or savings accounts go, I think we’ll do a savings account when they are in their tweens, maybe a tad sooner. I think I’d want them to get used to using cash, but being the debit-card lover that I am, I’ll probably also introduce them to a checking account so they can make debit transactions.
When they’re teenagers, I’d expect they have some sort of job, whether it’s babysitting, mowing grass, flipping burgers, working retail, etc. You learn quite a lot about money and life in those starter jobs!
At home, we can also play games that have money lessons. Things like Monopoly (but not the electronic version!), the Game of Life, Payday, etc.
Mostly, though, I think I want to keep the conversation open and flowing about how money works, and how to make money work for my kids. I don’t want them to go down a bad financial path when they’re adults. I’d like to equip them with the information they need on the basics and let them make small mistakes if needed so they can learn.
Accidentally overdraw your account? Oh darn. Here’s a lesson in paying overdraft fees. Maybe you’ll remember for next time. Or maybe you’ll learn how to negotaiate that fee away.
Have an expensive item on your wish list? Ok! Now let’s figure out how you can save up for it and earn money to pay for it.
My overall purpose would be to help them independently make good money decisions. I think having their own bank accounts can be a part of that.