You taught them how to read and ride a bike, but have you taught your children how to manage money? Do they understand the value of being generous?

Proverbs 22:6-7 says, “Start children off on the way they should go, and even when they are old they will not turn from it. The rich rule over the poor, and the borrower is slave to the lender.” I used to think it was a coincidence that these two verses were next to each other. Now, as my husband and I raise our own children and teach them about stewardship, I have changed my mind. I believe God meant to stress the importance of teaching our children about money.

A recent study showed that the average amount owed by American households with student loan debt was $47,671.1 In addition, more than 20 percent of borrowers with outstanding loans are likely either to default or be delinquent in repaying those loans.2 For current college students, it may be too late to avoid learning about debt the hard way. But if you still have children at home, save them (and yourself) some heartache by teaching them the basics of good stewardship.

Have the conversation
Many everyday transactions can lead to discussions about money. At the grocery store, talk with your kids about comparing prices and staying within a budget. At the bank, teach them that the automated teller machine doesn’t just give you free money. As they get older, help them open their own savings account and checking account with a debit card. You can teach them to look at their bank statement and examine where they are spending money. Consider showing your kids your credit card statement to help them understand how “swiping the card” takes money out of your pocket.

Let them earn it
An allowance program, where payments are tied to chores or household responsibilities, can help teach children the relationship between work and money. Your program might even include incentives or bonuses for exceptional work. At Christmas time you could create a budget for them to purchase presents for family members, allowing them to decide how to spend the allotted money. This can help them learn to balance their wants and needs at a young age, when the stakes are not too high.

Teach kids about saving, investing, and even retirement planning
To encourage teenagers to save, you might offer a match program—perhaps 25 cents for every dollar they put in a savings account. Once they have saved $1,000, consider helping them open a custodial investment account, and teach them how to research performance and ratings online. For teens and young adult children, you might even think about opening an individual retirement account (IRA). Some parents offer to fund an IRA for their children as long as their children are earning a paycheck.³

Talk to them about giving
Over the years, my husband and I have talked with our kids about the organizations we support as a family. We explain why we give to those organizations and what happens with the money we donate. To encourage generosity, it’s a good idea to help children budget a portion of their allowance for giving. Kids can also research a charity to receive their funds, which helps them feel empowered in their giving decisions.

Finally, as you teach your children about money, don’t get discouraged if they don’t take your advice. Mistakes made at this stage in life can leave a lasting impression. Also, resist the temptation to “bail them out” when they make a financial mistake. We all learn better when we reap the natural consequences of our actions. Your children probably won’t be stellar money managers at first, but what they learn now could pay them back later in life – when it really matters.

 

Rachel Gray
Vice President for Customer Care

1. NerdWallet, 2019
2. U.S. Department of Education, 2019
3. Contributions to a Traditional IRA may be fully or partially deductible, depending on your individual circumstance. Distributions from traditional IRA and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.