For many adults, relationships with money and personal finances are complicated, jumbled by past missteps, mixed expectations and the full spectrum of emotions.
Parents of young children, however, have the opportunity to set their kids on a different path.
Involving children of all ages in open discussions about money and money-related activities—such as setting up "spend-save-share" banks and basic lessons about budgeting—can pay sizeable dividends down the road.
"If we're not intentional about the lessons we're giving our kids, that means we're leaving things to chance," said Amanda Barrett, a senior consumer product manager with BOK Financial®. "Given the importance of financial fitness in a person's long-term wellbeing, parents can be incredibly influential."
Breaking it down
The foundation of a "spend-save-share" practice is rooted in teaching children that every dollar they receive is not immediately available for spending. Instead, a portion is placed in long-term savings, another slice is dedicated to charity donations and the balance may be spent as desired.
"It really breaks down into teaching the difference between a need and a want, putting money away today for a future purchase and instilling a duty to help others," Barrett said.
She added that children who stick to such allocations also learn discipline in money matters, which can help them plan for the future financial decisions, from loans and insurance to retirement savings.
“Even simple budgeting helps teach children how to think, solve problems and develop discipline.”- Amanda Barrett, senior consumer product manager at BOK Financial
Providing a framework
The simplest approach to the spend-save-share model is to buy three piggy banks—or have the child make their own—and put a label on each. Then, when they receive any money, whether it's an allowance, earnings from helping others with chores or a holiday gift, they divvy it up between the three banks.
The amounts or percentages vary from family to family. Some parents equally divide the cash in thirds, while others recommend 50% in spend and the balance split between share and save.
As the homegrown savings expand, accounts at a bank or other financial institution can extend the impact.
"Having dedicated accounts can help reinforce lessons around budgeting, intentionality and discipline," Barrett said.
As children grow older, the dollar amounts increase and electronic payments become more common (like from a first job). Relationships with a bank or other financial institution become even more valuable.
Lessons change over time
Engaging children in money discussions at an early age can also minimize the stigmas that frequently build up around personal finances.
Barrett said that parents can further normalize the household cash flow through some age appropriate activities such as:
- Ages 6-10: Take children on the weekly grocery trip and have them track the running total as items are added to the cart to keep the bill within that week's budget.
- Ages 11-15: Expand the household budget discussions to include elements such as utility bills, clothing allowances and the cellphone bill.
- Ages 16 and up: Have teens create a personal budget that allows for activities with friends and regular expenses as well as saving for the future.
"It also helps to show your children how you budget and pay bills, and if you're comfortable with it, show them your accounts and explain how money flows in and out of them," she suggested. "They learn best by watching what you do."
In addition, resources such as the Money Smart for Young People program from the Federal Deposit Insurance Corporation can provide support with online content and hands-on materials for all ages of children.
Mutually beneficial experience
Some parents may question their ability to teach their children about personal finances, especially if they have endured some setbacks of their own.
"Many of us remember a time when we didn't have much savings and some kind of crisis popped up, like when a car broke down and we didn't have the resources to get it fixed," Barrett said. "But as you dig through what happened in the past and share lessons for the future with your kids, you learn something about your own journey."
It also helps to have access to a financial institution that makes it easy to put money away. For example, BOK Financial offers a youth savings account for children under 18 and only requires an initial $5 deposit.