As parents, our greatest job is to prepare our children for the world and help them grow into independent adults. Although there’s no doubt the average parent only wants what’s best for their kids whether they’re infants or college students, oftentimes parents neglect to teach their children financial literacy, leading their kids to struggle with money when they leave the nest. Teaching your child money skills is an ongoing process that begins early, but it is more than worth it to see them flourish as adults.

Teach Your Child to Spend and Save Money

This is the earliest lesson children should learn around age five, aside from “money has value and doesn’t grow on trees.” Usually, kids understand only the vague concept of currency. So, they may struggle with the prospect of saving initially. After all, young kids are impulsive and seek instant gratification – the antithesis to responsible saving habits.

Start by narrating your money thoughts to your child while you’re shopping or going over bills. You are your child’s role model, so seeing mom or dad explain grown-up things like grocery shopping can inspire them to get involved. You can even break it down in ways they can understand. For example, say something like, “Mom needs eggs from the grocery store. I see two different packages of eggs. One is 50 cents more expensive than the other, so I should buy the other one to save money.” Try to avoid impulse buying in front of your child except as a treat so they understand spending shouldn’t be taken lightly.

Begin a spending and saving jar for your child. Once you explain that people choose to spend money on things they need and save money for things they want, you can begin practicing this with your children. Any spare change or allowances they receive can be placed in the spend or save jar, depending on what they decide to do with it. Make the saving goals short-term initially so it’s easier for a child to grasp. For instance, saving months for a new bike is going to be truly torturous for a child. Try saving for a week to buy a weekend dessert or snack of their choice.

Educate Them About Long-Term Goals

As they age, your child will begin to understand that money can be saved for the “big wants” like a new game system or a trip to the zoo, not just candy from the grocery store.

Make a list of your child’s “big wants”. Whether they want a new tablet or game controller, help them understand that these are achievable goals if they save responsibly. This is the time you can begin showing them how to budget intelligently for the long-term. Frame this conversation as satisfying both short- and long-term goals, just like adults do. If, for example, they want a new game and have calculated it would take a month of saving all their money to buy it, they are then faced with a choice. They can either go a full month without any spending money at all, or they can save half their money so they can spend money tomorrow with their friends and get their game in two months.

Be active in their saving. If your child does not already receive an allowance, it may be a good time to offer one so they can experience saving and spending firsthand (if you can afford it, of course). The most important part is to help them see their own progress. Too often, kids get stuck in a rut with piggy banks because they can’t tell how much they’ve saved. Count their saved money with them every week so they can enjoy getting closer to their goal.

Include Your Child in Money Talk

Many adults cringe at the thought of revealing the inner workings of their household finances to their children. There is a prevailing feeling that money talk is “too adult” to involve children in. However, opening up can help kids understand the expenses of being an adult and see how you handle money situations in real-life.

Although you may want to be careful to avoid making your child feel shameful of the costs they contribute to the household, you can walk them through your itemized monthly expenses and tally up the grand total of how much it costs to have the life you do. The number may boggle your child’s mind, but it will also help them develop an appreciation for the money you bring home. You can even ask them to help you problem-solve minor situations. For instance, if your electricity bill is higher than usual this month, you can ask them how the household should bring down the cost. If their answer is to use less electricity, ask them to give ideas where you could use less. Making household finances a team sport rather than a secret can help develop a dialogue about where adult money goes on most days.

Explain Investments as Opportunities

No, your child is not playing the stock market or getting in on the ground floor of a startup. Once your child reaches the teenage years, they likely will be looking for a job. At this point, they should also have a checking and saving account with their bank. This will be the real test of the spending and saving jar they grew up with. Because most saving accounts are interest-bearing, they can learn about compound interest and how they can build their finances faster the sooner they start saving. This will get them to those really big goals faster like buying their first car.

If your child is going to college, this would also be a great time to go into the nitty-gritty finances of higher education. Spending tens of thousands to hundreds of thousands of dollars on a college degree is the largest decision your child will make while under your roof. Sit down with them and comb through the tuition, fees, and extra costs of attending several different colleges. Then, go over their options for paying for it – money you’ve saved, grants, scholarships, and loans. Together you can come up with a plan to afford the soaring costs of college. After all, higher education is an investment and those with degrees make significantly more money across their lifetimes than those with only a high school diploma.

Be Open About Credit

As your child prepares to leave the house, you’d be remiss to discuss money without touching on credit. Credit cards are the boogeymen of the financial world, but they can go a very long way to ensuring your responsible young adult starts life on the right foot. Explain how credit plays a role in their ability to be approved for large purchases like leases, car loans, and even mortgages. So, having a good credit score can be the foundation for a healthy financial life. Unfortunately, student loans aren’t enough.

Although buying a car or house can greatly improve their credit score, your child can’t make those large purchases until they have a decent score to begin with. The answer, besides on-time student loan payments, is opening a credit card. Credit cards don’t need to be used for shopping sprees, though. Before opening a card in your child’s name, explain how to use it responsibly. That is, use the credit card for small, everyday purchases and pay it off in full every month. This can be as simple as only whipping out the credit card for groceries or gas. These consistent uses and on-time payments will do more to boost your child’s credit score than any student loan payment.

Teach Your Child to Stay Money-Wise by Protecting Their Assets

Developing your child’s sense of financial independence and responsibility is a big job, but it’s worth all the life lessons in the end. Staying money-conscious, though, can often mean scrutinizing their bills and account records for discrepancies. After all, not all financial institutions are there to help. Too many banks and credit unions are taking advantage of their youngest customers just starting out by charging unfair overdraft or NSF fees. The class action attorneys at McCune Wright Arevalo, LLP, are out to put a stop to it. With decades of experience and millions recovered for our clients, you can trust your child is in good hands in they become victimized by unscrupulous financial institutions.

If you or your child believe you have been unfairly charged by your bank or credit union, contact us today or call (855) 976-3154.