Life lessons: Raising financially independent kids
Start teaching kids about money management as soon as it makes sense for your family.
Video Transcript: Teach your kids to be financially independent
Video Duration: 2 minutes 30 seconds
Transcript Date: May 23, 2022
It's never too early: Elapsed time 0 minutes 0 seconds [0:00]
It's never too early to start talking with your kids about money. Financial independence isn't taught in schools but at home. And it's an education that kids will carry with them the rest of their lives. Start with age-appropriate money lessons. While your kids are still young, teach them that work equals money. Give them small jobs around the house. Earning a quarter every time they feed the family pet can be exciting!
Exercises on budgeting: Elapsed time 0 minutes 23 seconds [0:23]
Teach them that money equals things. Print off pictures of things your children want and draw circles to represent how much money it would take to buy them. Then, mark off circles as they're earned. This can help them understand that money can grow. As your children get older, youth banking accounts can help them learn about budgeting money. Having their own debit card can empower them to think about how and when they spend their money.
Each kid is different: Elapsed time 0 minutes 47 seconds [0:47]
It's important to remember that personalities can play a big part in how your kids think about money. One child may earn money and then not think about it, so it accumulates. While another may spend money as fast as they earn it. Don't fight your child's personality. Rather, embrace it. Some children are more diligent about saving when they set specific goals. Some will get excited when they realize that tasks requiring more effort can earn them more money. Discuss spending goals and include them when creating jobs around the house.
Self-assessment: Elapsed time 1 minute 17 seconds [1:17]
Don't forget about your own personality. You first learned about money from your parents. The advice you received, whether good or bad, could be passed to your children. A self-assessment of your own financial biases can be useful to understanding your money management behaviors and help you decide how to teach children to save and spend.
Make a large goal: Elapsed time 1 minute 36 seconds [1:36]
You can also teach your children to save by letting them aim high. As kids mature, so will their financial goals. Goals like toys and games will evolve into cellphones and traveling. Saving for something big will help them learn how to budget and prioritize. Once a large goal is set, every financial decision along the way can be tracked against it.
Utilize technology: Elapsed time 1 minute 57 seconds [1:57]
Youth bank accounts, including USAA Youth Spending and USAA Youth Savings, can help your child begin smart money management habits. Depending on their age, they may also access a mobile app to see their account activity, and you can set the parental controls to the level of oversight they may need.
Provide a strong foundation: Elapsed time 2 minutes 14 seconds [2:14]
Regardless of what your child wants to buy, if the money management lessons you offer are consistent, you'll give them a strong foundation for their financial future. Visit usaa.com/youthbanking to explore our youth banking options today.
Description of visual information: [The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.
USAA means United Services Automobile Association and its affiliates.
Bank products provided by USAA Federal Savings Bank, Member FDIC.] End of description.
End: Elapsed time 2 minutes 30 seconds [2:30]
“Money doesn't grow on trees.”
When a parent responds in this way to a child's request to buy something, adults know the subtext about budgeting, saving, spending prioritization and living within financial means. Kids just hear “no.”
How do you get kids to understand what you mean? You can start by teaching them, when they're old enough to learn, how to handle money responsibly. This isn't a subject taught in schools. Money management is a lesson kids learn at home and carry with them for the rest of their lives.
Luckily, there are more helpful tools and resources for parents than ever before. Start with these tips to help your kids be financially independent in the future.
Offer age-appropriate money lessons for kids.
Matthew Angel, CERTIFIED FINANCIAL PLANNER™ professional and USAA Director for Advice, is a self-professed financial nerd who's eager to help set up his four kids for financial success.
“The first concept we started with, at around age 3, is that work equals money,” says Angel, whose kids' ages range from 4 to 9. “Their first job was feeding the dog and earning a quarter. Receiving that quarter every time made feeding the dog very exciting.”
The second concept is that money equals things. Angel and his wife have printed out pictures of the items their children want and have drawn circles to represent how much money it would take to buy them. Then they'd mark off circles as they were earned.
“That ties in the idea of accumulating money,” he says. “We've found that the visualization helps, and we always make a big deal out of it when they reach the goal.”
Further down the developmental road is USAA Bank Checking Product Manager Lemont Williamson, whose preteen and teenage daughters have youth banking accounts and are in the budgeting phase of financial education.
“I notice that my kids have little to no spending restraints when Daddy's paying,” Williamson says. “However, when I make them use their own debit cards, their spending habits are totally different. My kids become more frugal when using their own cash.”
Recurring bills are coming into play, too. His 13-year-old chose monthly payments for her theme park pass versus an up-front single payment, which would have taken longer for her to save.
“Currently we're teaching credit basics,” Williamson says. “And I think the next money lessons will be about investing and the value of compounding and growing your money."
Recognize the different personalities at play.
Everyone thinks of money differently, and that includes kids.
“One of my sons will earn money and then not think about it, so it accumulates,” Angel says. “On the other hand, money burns a hole in my daughter's pocket.”
Don't fight your child's personality. Rather, find ways to engage it.
Angel found that his daughter is more diligent about saving when specific goals are set. His son realized tasks requiring more effort could earn more money. He's offered to do more challenging chores, and his parents let him try.
Another personality in the mix is your own. Parents first learned about money from their own parents, and those parents from theirs. The advice you received, whether good or bad, stays with you. Think about what attitudes and practices you want to pass on to your children.
“I'm teaching the value of work in terms of earning money to buy things,” Angel says. “Let's say my perspective about having things is negative. If my kids pick up on that they might learn instead that things are bad, so money is bad.”
A self-assessment of your own financial biases could be useful to understanding your money management behaviors and help you decide how to teach children to save and spend.
Teach children to save by letting them aim high.
As kids mature, so will their financial goals. Targets like toys and games will evolve to cellphones and travel.
“Before they're out of your house, your kids should try saving for something big,” Angel says. “This will help them learn how to budget and prioritize. Parents can help by offering to match a certain amount, too.”
His daughter has her sights set on a trip to New York City to see a Broadway show. Once she set the goal, every financial decision along the way has been tracked against it.
Williamson's family has a similar strategy.
“We set a couple of big savings goals every year,” he says. “The next one is a family vacation.”
Youth bank accounts, including USAA Youth Spending and USAA Youth Savings, can help your child begin smart money management habits that will help them be financially independent in the future. Depending on their age, they may also access a mobile app to see their account activity. And you can set the parental controls to the level of oversight they may need.
Money management for kids can come with parental perks.
As a parent, give yourself some grace. You don't have to teach all money concepts at once. There will be times when you don't agree with how your kids want to spend their money.
“Let them make some mistakes, if that's what it takes,” Angel says. “This is more about learning than being perfect.”
Sometimes allowing kids to be responsible for their own earnings and savings means you say yes when you might otherwise say no. The expense doesn't come out of your pocket, and it gives them more autonomy.
“Can I have that expensive thing?”
“Yes, and here's how you can earn and save the money to buy it.”
Acknowledge what they want and support them as they work toward getting it. And if the tasks they perform to earn money also help around the house, well, it'll be a bonus to have fewer things on your own plate.
Regardless of what your child wants to buy, as long as the money management lessons you offer are consistent, you'll give them a strong foundation on which to build their future financial independence.
The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.