Best Practices

Top Financial Topics to Discuss with Your Family

by Jim Hughes   Date Published: Feb 15, 2022

Twenty-one states now require high school finance courses. Although this is a step in the right direction to instill financial literacy in young adults, most states still do not have such programs. As a result, there is concern that young adults will not be adequately prepared to manage their finances in the real world.

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However, teaching children about finances doesn’t have to take place in a formal classroom setting. Instead, parents can begin discussing financial planning topics with children at an early age. There are several financial topics to discuss within families, allowing kids hand-on approaches to savings, budgeting, and spending.

Bills & Budgeting

Budgeting.

Undoubtedly, the most important financial topics to talk about with your family are bills and budgeting. It may be challenging to convey to your kids, especially younger children, the value of the dollar. However, correlating tangible real-world items can help your kids make the connection. These can include groceries, car payments, mortgage payments, rent, or utilities.

Spreadsheets

Consider including your children in your monthly budgeting. This can help them visualize the cost of living while incentivizing them to learn healthy budgeting habits. You can utilize the help of your children to create a monthly spreadsheet that lists all your bills. Next, include your kids in the process of allocating your income towards these expenses. If you pay your bills online, include your kids in the process. As a result, they can learn the importance of prioritizing necessities, spending within their means, staying organized, and punctually paying bills.

Practicing Budgeting

Budgeting can also take place on a small scale. Your kids can take the initiative to budget your weekly grocery list, a monthly family activity, or a yearly vacation. For example, you can give your child $250 to buy groceries for the week. The goal is for them to purchase healthy items and stay within budget. These lifestyle-based activities allow for hands-on learning and help kids recognize how budgets directly affect their lives.

Savings

With an increasingly digitized world, traditional piggy banks may not keep your kids engaged in savings. Teaching kids about savings is one of the key financial planning topics as it encourages them to plan for expensive purchases.

Savings Accounts

The best way to teach your children about savings is to open a savings account. When opening the account, you can add yourself and your child as joint account holders. This allows your child freedom to access the account and gives you control. You can help your child make weekly or monthly deposits into the savings account, allowing them to learn about interest and healthy financial habits. Through a savings account, your child can set savings goals, watch their funds grow, and understand the value of money.

Financial Literacy Apps

For kids who enjoy entertainment-based educational activities, there are numerous apps that teach financial topics in fun and interactive ways. For instance, Savings Spree teaches children the basics of personal finance through game show activities. The activities allow kids to earn money, which they can then save, spend, donate, or invest. The game’s goal is to help kids visualize the effects of their financial choices and stimulate good saving and spending habits.

Spending

Spending.

Ultimately, good budgeting and savings practices become ineffective when kids have poor spending habits. That’s why teaching kids how to spend within budget is among the financial topics to discuss with them.

Work-cost Ratio

One way to encourage kids to develop healthy spending habits is to have them visualize the work-cost ratio of the item. It can be easy for children to impulsively purchase expensive items when they don’t quite grasp the value of the dollar. Instead, have them calculate how many chores they’d have to complete to save up enough money for the purchase. As a result, kids can begin to correlate the number of hours they spend earning their allowance to the cost of the item. This can help them recognize the value of their work and earned money.

Comparison Shopping

Additionally, comparison shopping goes hand in hand with visualizing the cost of the item. For example, if you are shopping for new shoes with your child, there will be a large selection. However, your child will likely want the most expensive pair. Therefore, this is an excellent opportunity to teach them how to compare the shoes’ quality, price, and functionality. As a result, kids can learn how to get the most bang for their buck without necessarily splurging on the most expensive item.

Moreover, comparison shopping can be helpful to teens who do their own back-to-school shopping. It can also be beneficial if teens pay for hobbies, extracurricular activities, or necessities. Comparing the prices and quality of the item against their budget can help kids learn what to spend money on and what is overindulgence.

Debit Cards

Debit cards are also an excellent way for teens to learn how to manage their money and spending. It teaches them the ins and outs of debit and credit usage, preventing them from viewing the card as a “piece of plastic.” The Visa Buxx is a prepaid debit card that can be used online or in-store. Parents can pre-load allowance money onto the card, allowing teens the opportunity to practice practical spending.

Setting Goals

Once your kids start to master the basics of personal finance, you can encourage them to set goals for growth and continued learning. You can encourage your kids to save by working towards a goal. For example, the account can be dedicated to saving for a new bicycle, car, or college. Goal-oriented savings accounts can incentivize kids to budget and spend smartly so they can afford the big-ticket purchase.

529 Account

If your teen is eager to save money for college, consider opening a 529 savings account . This is a tax-advantaged savings account where investments grow tax-free. The account is used to pay for qualified educational expenses, such as college tuition or housing. Your teen can invest their allowance or part-time income in a 529 account to help save for future college expenses.

Savings Apps

Savings apps.

Kids can learn good financial habits by doing. BusyKid is an award-winning app that helps kids track their allowance, spending, and savings. Parents set the list of chores, and once they are completed, the allowance is automatically deposited each week. Every week a percentage of the allowance goes to your child’s savings account, and they can choose to spend, donate, or save the remainder. The app helps kids see their savings grow while also learning how to track their money.

Bankaroo is another app that helps kids record their expenses, track their spending, and manage their funds. It is a virtual bank that offers savings features and rewards kids for reaching their goals. Additionally, you can automatically deposit your child’s allowance into the app, and it gives them the option to set up checking and savings accounts.

Final Thoughts

Broaching financial planning topics with your family and teaching your kids healthy practices can be a big undertaking. However, it can be done with time and practice. There are many ways to impart financial skills to your kids, even if it is asking them to help you pay the bills or budget the weekly grocery shopping. Once your kids have mastered the basics, you can allow them more freedom to develop healthy savings and spending habits through a savings account and debit card.

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Jim Hughes, author at OpenLoans
Director of Content
Look to Jim for advice on budgeting, savings, insurance, stocks, retirement funds, and other topics in personal finance.
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