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Money & kids: Simple ways to raise financially smart kids.

It’s never too early to start teaching kids about money and helping them develop positive financial habits. From preschool to high school, there are many ways to teach kids money habits based on their age. Here are a few simple ways to instill positive money habits and start your kids on a path toward financial responsibility.

Teach by example.

Kids learn by example and now is the time to show them some of the simple ways you’re saving money.

You can repeat a mantra in front of them, such as:

  • I love to save money.
  • Saving money is a great habit.
  • I love to save money and build up my financial nest.

Your kids are watching when you spend, save and borrow money. Start by looking for teachable moments in everyday activities. Let younger kids see you make purchases with cash so they can observe how money goes from one place to another. When they’re a little older, introduce the concept of credit by showing them a credit card statement, and explain how a purchase of $100 can ultimately cost more because of added interest.

Read to them.

We know reading to children is an important part of development and a great way to teach them about money and finances. You can find books for all grade levels here. Reading together is a great way to start a conversation about how your family saves and spends money.

Look for opportunities to involve them.

Getting hands-on is a great way for your kids to learn positive money behaviors. For example, younger children can help compare prices at the grocery store, while older kids can help estimate costs for a family vacation or new car purchase.

Introduce budgeting basics.

Teach your kids to create three buckets to use for any money they receive: one for saving, one for spending and one for sharing. For younger children, use a clear piggy bank or jar so they can see their money grow — and watch it disappear when it’s withdrawn to make a purchase.  

  • Save. Encourage them to set aside a portion of any money they earn or receive for the future–like that new bike they really want.   

  • Spend. Let your child decide how they’ll spend their money and experience the consequences. If they make an impulse purchase they later regret, they’ll be less likely to repeat that money mistake in the future. For example, if they buy that toy now, they may not have enough money for other things they want in the near future.
  • Share. Whether it’s a local fundraiser or a national charity, encourage your child to donate to a cause they care about. Help them understand how their money can be used to help others.

Encourage them to manage their own finances.

Many experts believe that receiving an allowance helps kids learn self-control. Managing their own money helps them understand the difference between wants and needs. Provide opportunities for kids to earn more money by doing extra chores or encourage them to find a part-time job when they’re old enough so they recognize that hard work pays off, literally. There are many different ways for an older child or teen to earn money around their neighborhood, such as babysitting, yard work for a neighbor, pet sitting, or organizing a garage sale.

As your kids grow older and more responsible, transition them from the three-bucket approach to bank accounts. Help them open a checking account so they learn how to use checks, debit cards and mobile or online banking. A personal savings account can be a great motivator as they watch their savings grow. Consider Commerce Bank’s myRewards Savings, a personal savings account that encourages saving by paying you to save for your goals.

Promote smart credit usage.

As your child transitions to college, help them open a credit card account. Explain responsible credit management like using the card in moderation and paying off the balance in full each month. That way, they’ll have a credit history and solid credit score before they need to borrow money to purchase a car or apply for their first apartment.

Keep teaching money management skills as your kids get older. Once you lay the foundation, continue to encourage and praise them for developing good habits. Every bit of financial knowledge you pass on to your kids helps them move toward a confident and financially savvy future.

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