In a previous blog, we discussed the importance of teaching your children the principles of financial responsibility so they can become wise spenders, generous givers and intentional savers. Having children perform specific tasks and granting allowances for a job well done is a great tool for training good stewards. Your approach to your child’s financial training should be dynamic and adapt to their needs as they grow and mature. Here, we offer you a few guidelines for helping your child achieve financial independence and a well-established savings account by the time they leave the nest.
Obviously, you can’t sit your toddler down and begin to discuss the importance of retirement and savings accounts. While your intentions are undoubtedly good, such a message will simply go right over their heads. Instead, once your child has adequately grasped the concept of money (between ages three and five), start introducing them to delayed gratification. The notion that you may have to wait to buy something you want is difficult to understand—even for many adults. Provide the children with three jars to sort their allowance money, labeled “give,” “spend,” and “save.” By encouraging them to give some money to charity or the church offering and to save up a majority of their earnings for something they really want, like a toy or a game, you’ll give them the fundamentals they need to understand the importance of savings all on their own. The money they are saving needs to be small, so they get short term gratification, as they cannot grasp a long term savings plan at this age.
As they reach ages six through ten, continue the “give/spend/save” concept, introducing the notion of making choices about how they spend their hard-earned money. Take them on grocery shopping trips and discuss why you choose generic brands over name brands–because they taste just the same and cost less. Start giving them your grocery list and allowing them to make decisions about whether to choose generic or name brand for each item on the list. As always, the best way to lead is by example, so be sure to have a conversation with them about your own financial decisions
By the time your child is about twelve, they will firmly understand savings accounts and will be ready to conquer longer-term financial goals. This age is a good time to start talking about compound interest. For children, such high-level financial concepts are much easier to grasp with real numbers rather than abstractions; Compass Catholic offers a “Compounding and Your Return” calculator that can help. Reinforce the importance of their financial decisions by discussing the difference between needs and wants.
Finally, from ages fourteen to eighteen, your child will be preparing for college and getting ready to enter the adult world. These years are challenging as they become independent, but what better gift to give them than Biblical stewardship? Help them understand the importance of independence by cutting back on your “bailouts.” For example, if they spend their lunch money on a video game, they’ll need to figure out how to eat lunch for the rest of the week without you giving them extra money or making their sandwiches. This is also a good time to help them lay out a budget for college expenses beyond tuition. Many universities offer a price calculator to help estimate extracurricular activities, food, and so on for the average college student. Encourage them to take up a part time job, but make sure it doesn’t interfere with their academic schedule.
Even if you didn’t start your child’s financial education in their toddler years, it’s never too late to begin—and your example may be the best learning tool they will receive. Remain steadfast in your own Biblical stewardship responsibilities, and they are sure to follow suit and reap their own benefits.
“Those who respect their father will live a long life; those who obey the Lord honor their mother.” Sirach 2:6