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One of the most important things we can teach our children is how to successfully manage their money. This, along with good manners, will help them achieve their goals as they become adults.
Sharing good money management techniques with your kids can start as early as elementary school. In fact, we recommend the following tips to teaching your children good habits based on their age.
Open a Savings Account for each of your children at the age of 5 (or as close to it as possible).
Give the new Savings Account a Nickname, using the respective Child’s Name so you can periodically show them their savings account balance.
Fund the account with around $100 to get them started.
Each time your child receives money as a gift, have them deposit half into their new Savings Account and spend the other half on something fun.
When your child wants to buy something, you can show them the balance on their account, so they can see how much it would cost them to purchase the item. This will give them an idea of how long it takes to save for certain items.
If possible, provide your child with opportunities to make money. You can give them the option to unload the dishwasher, take out the trash, and/or unload groceries for $5 per chore. Then, have them put half into their Savings Account and spend the other half on something fun. They may want to put their “fun money” into a Piggy Bank and save it up for something bigger.
Make sure your child has a Savings Account designated for them at the beginning of high school. If not, open one as they start their freshman year.
Apply the same practice as noted above, encouraging them to put half of the money they receive into their Savings Account, spending the other half on something fun.
Offer your child various opportunities to make money around the house for doing chores such as mowing the lawn, cleaning the family bathroom, taking out the trash, etc.
If your child is interested in having a car at 16, or any other big purchase, they may want to use their Savings Account to save for it. Consider telling them you will match whatever they save, if this fits in your budget.
Show them their statements and screenshots of their Savings Account balance, so they understand how long it takes to save money.
When they turn 16, take them to the Credit Union to open a Checking Account and a Savings Account in their name. When they earn money, they can put half into their Savings Account and the other half into their Checking Account. Help them review their transactions weekly and balance their budget monthly.
These young adults should be entering college with some knowledge of how to manage a budget, along with their own Checking and Savings accounts.
Prior to dropping them off at school, go through their monthly expenses. Also review their monthly income, whether it be from a job, their allowance or from a student loan.
Have them calculate how much they need to cover their monthly fixed expenses: tuition, rent, utilities, cell phone, food, followed by how much they have leftover to spend on fun things.
Work Income + Allowance + Student Loan $
Tuition + Rent + Utilities + Cell Phone + Food
Leftover Each Month to Either Save or Spend
After their first year of college, we recommend they apply for their own credit card with limited spending power, maybe $500. This will allow them to start to build credit and further learn how to manage their money.
Last but not least, it is important to remember that setting a good example for our children is always the most effective way to teach them good habits, the same is true for instilling good money management skills. Don’t be afraid to share how much things cost relative to how much you make, let them know how much you have to spend weekly and how you budget to meet your family’s objectives. Talking about money can be fun and should be started early, so the subject is comfortable for all.
This past year has caused many of us to re-evaluate our goals, our everyday practices, our intentions and our overall health – living through a pandemic will do this. If we’ve learned anything through COVID-19, we have learned that taking care of ourselves in all aspects of our life is crucial to our overall health. And, keeping our health in check is important insurance to fight off illnesses of any kind, including the Coronavirus.
As a result, many of us are exercising more, reading more, organizing more and spending more time with our immediate family. All of these practices are essential to good health, but many of us may be missing one very important area that needs attention…managing our finances.
Since money is central to everyday activities, approaching our finances in a way that benefits our well-being can add a sense of order and create a safe foundation in our life. Setting aside time each week to focus on money management will reduce stress, create stability and allow you to make informed decisions. However, before we focus on these weekly activities, we recommend taking the following steps:
Make a list of all your deposit accounts, the interest you are earning on each and where they are located.
Make a list of all of your loans (including credit cards), the balance owed, your interest rate and where they are located.
Create a list of all of your investment accounts and the balance in each.
Document your net monthly income and make a list of your monthly expenses. Subtract your expenses from your income to equate your disposable income.
Once you have a complete picture, create a schedule to review and manage your finances weekly. For example: 30 minutes every Saturday afternoon. We recommend covering the following during your weekly Financial Fitness Sessions:
Pay your bills and put money into your savings account, even if it is only $5 every week.
Compare your deposit rates to other financial institutions and move money, if appropriate.
Compare your loan rates to other financial institutions and refinance to lower rates, ultimately reducing your monthly expenses.
Create a path to pay off your credit cards, if you do not already do so monthly. Cash in any reward points you have for credit.
Take a look at your expenses the previous week and make a plan on what to spend in these specific areas during the next week. Ask yourself:
How much did I spend on going out to eat last week? How much do I plan on spending next week?
How much did I spend on groceries last week? Did I eat all of them? Can I spend less the next week, etc.?
How much money did I put into my savings account last week? How much can I put in next week? What do I need to do to increase my savings?
Regardless of what you accomplish each week, we are positive that reviewing and managing your finances weekly will reduce your stress and benefit your well-being.
If you’re receiving a stimulus check as part of the most recent COVID-19 Relief Package, it’s more important than ever to consider the coming months and make sure you’re using the money wisely. Let our insightful infographic help guide you through your choices as you prioritize how to spend your funds. Access, 5 Smart Ways to Use Your Stimulus Check, for a few strategic tips. If you have questions or would like more details, reach out to a financial professional located at our credit union.
Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/ NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CBSI-3381097.1-1220-0123