Financial literacy is a skill that can help people thrive. Teaching your child money management skills from a young age can help them develop a mindful relationship with finances and avoid costly mistakes.
A 2018 study from the University of Illinois at Urbana-Champaign found that 36% of young adults are “financially at risk,” meaning they have no savings with which to pay their living expenses for up to three months in the event of an emergency. Even those who were financially stable said they were only “moderately comfortable” about their financial literacy.
Fortunately, Busey offers several resources that were specifically designed to help you prepare children and young adults for future financial success.
Why Financial Literacy Is Important for Kids
Teaching young people about money at an early age provides them with both the knowledge and skills needed to make informed, responsible financial decisions.
- It teaches them to make responsible decisions. As children decide how to save and spend, they’ll be able to make thoughtful decisions about money and consider how it might impact other areas of their life. An adult who lacks basic financial literacy skills can easily fall prey to scammers, phishing attempts or other, similar financial traps—which can have a devastating impact that takes years to recover from.
- It prepares them for unexpected life events. Learning basic financial skills can teach children to prepare for unexpected challenges by keeping emergency funds readily available.
- It provides them with a path to empowerment. Children who learn healthy financial habits early in life are more likely to become independent and equipped to manage their financial needs as they grow.
- It helps them develop healthy money habits at a young age. A child who understands basic financial literacy is less likely to make decisions that can lead to massive debt or a poor credit score as a young adult. Intentional financial literacy in childhood leads to sound money habits down the road.
Tips for Teaching Children Smart Money Habits
- Start small. Money is a complicated topic, and it may take time for your child to fully understand its value. Starting small with something like an allowance can help children practice budgeting and making smart decisions.
- Needs vs. wants. Children often have a hard time distinguishing between these categories. Encouraging children to think about what they really need versus what they want can help them be more mindful about how they spend or save their money.
- Read books about financial literacy. Stories not only help children learn new skills, but also tend to model how those skills might translate to their own lives.
- Practice budgeting together. Teaching kids how to save money and organize their spending can help them avoid poor habits that lead to financial struggles later in life. Consider encouraging your child to save their money for something they will really enjoy or save together for a fun family activity.
- Speak openly about family finances. If parents aren’t talking with their kids about subjects like family finances or debt, their kids are likely drawing their own conclusions about money—which may not always be correct.
- Equip them with their own financial tools. According to the Program for International Student Assessment, American students who have their own bank accounts are likely to score higher in financial literacy measures compared to those who don’t. Learning how to handle money and being allowed to make mistakes while still under the watchful eye of parents or guardians can help children avert a financial crisis later in life.
- Make learning about money fun. Practicing financial literacy doesn’t have to be boring. Many resources, such as Busey’s complimentary digital platform, Financial Pathways, were designed specifically with children in mind. This creates an exciting, engaging and convenient way for kids to learn about money and healthy financial habits.
Ensuring Future Financial Success
Instilling financial literacy in children is important for ensuring their future financial success. If parents and guardians are open and honest with their children about money, provide them with the skills needed to make sound decisions and empower them to use those skills to make responsible choices with their money, they will be adequately prepared to pursue financial success in the next stages of their life.
Busey's MoneySmart Youth is a fun and engaging financial literacy program designed to teach kids and young adults the importance of money—how it's used, earned, saved and taxed. Partnering with the FDIC, MoneySmart Youth offers various lessons and activities for four different age groups, from Pre-K to 12th grade. For resources specific to older children and young adults, check out Busey’s Financial Pathways, which was developed specifically for 7th through 12th grade at busey.com/FinancialPathways.
This is not intended to provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients should obtain their own independent tax advice based on their particular circumstances.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.
This presentation is for general information purposes only. It does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client.
Investment products and services through Busey Wealth Management are:
Not FDIC INSURED | May lose value | No bank guarantee