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How to Raise Fiscally Fit Kids


Mother and Child Adding Money to a Piggy Bank

September 29, 2016

Are your kids on the right track to financial independence?

Home is the best place for children and young adults to learn to manage money. After all, you can teach financial principles based on family values. However, study after study confirms that most kids and teens aren’t learning the basics. In one study conducted for Junior Achievement USA, Harris Poll found that 40 percent of teens do not have a savings account, checking account, or debit or credit card, and 59 percent of teens do not have money management classes offered at their schools or home curriculum.

Achieving economic prosperity is difficult, and it's especially hard for young people who've never learned how to manage money. But together, we can create a generation of financially fit kids, starting today. At ECCU we share tips on how to get kids in top financial shape. We invite you to welcome your kids into the ECCU family, too.

Use Allowances as a Teaching Tool

One of the best ways to ensure your children grow up financially fit is to give them practice managing money with an allowance.

But what’s the best way to approach an allowance? There are many theories, and we hope you’ll share your thoughts in the comments below. We’ve gathered a couple of perspectives to kick-start the conversation.

  • Ron Lieber, personal finance writer for The New York Times and author of “The Opposite of Spoiled,” says he and his wife pay their 7-year-old daughter $3 a week – no chores necessary. Lieber’s daughter puts $1 in a “save” jar and $1 in a “give” jar for a cause of her choosing. The final $1 she can spend as she wishes. Lieber’s reasoning is that an allowance is a teaching tool, and making it contingent on chores muddies the issue.
  • Stop the presses, says Lewis Mandell, a financial economist and professor emeritus at the State University of New York, Buffalo! He says unconditional allowances are a “terrible idea,” citing a 2000 study that showed kids who received a regular allowance left high school knowing less about personal finances than kids who didn’t received one, although the differences were slight.
  • Dave Ramsey says that it's important to show your child that money comes from work, so he endorses a commission type allowance."Once your child is old enough to do basic chores, she’s old enough to earn a little money doing them. If she works, she gets paid. And if she doesn’t work, she doesn’t get paid. If she can understand that money comes from work at age 4, then she’ll be ready to hit the real world running at age 24."

One problem may be that, like many Americans, kids aren’t the most diligent about saving. Although 61 percent of parents pay an allowance, only 1 percent report their children save any of it, according to a 2012 survey by the American Institute of CPAs. Approximately 90 percent of these parents require their children to do chores to earn it, but only 81 percent counseled them about money management. If you’d like to step up your savings game, and get your kids in on the action, here’s our take on how to practice the lost art of piggy bank savings.

Leapfrog into Money Management Principles

Regardless of how your children earn an allowance, use it as a tool to reinforce good money habits from an early age. Talk about finances early and often, and set a good example.

  • Consider matching their savings. Do you want to help your children save for college or another long-term goal? Some financial experts say you can encourage kids to save by offering matching funds. For example, you could tell your children that for every $1 they set aside for long-term goals, you’ll match it in their ECCU Start Young Savings Account. Share the statements with them so they can see their money grow.
  • Gradually introduce them to financial products. Another approach – especially good for tweens and teens – is to encourage them to manage their own allowance or earnings with Start Young Spending Accounts. You’ll be helping them pump up their savings accounts while teaching them about responsible ways to manage their spending, read statements, track transactions, pay bills and achieve long-term goals.
  • Make budgeting a family activity. Include your children in household money discussions. Show them how you budget income and expenses. As their skills improve, give them challenges —finding a better mobile phone plan, calculating the total monthly cost of owning a car, or sticking to a budget for back-to-school or holiday spending. And with their own accounts, they can use the ECCU financial tools to build their budget and track spending. 
  • Be their coach. Remind your children to ask for help when they need it – and turn to your credit union when you want help. Our tradition of service and philosophy of self-help make ECCU and all credit unions a natural partner in pursuing financial security.
Category: Common Cents