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Children and Financial Education: Lessons to Teach Them about Savings -  Now

Children and Financial Education: Lessons to Teach Them about Savings - Now

09/15/2021

“Money doesn’t grow on trees” is a mantra that almost every parent has probably said to their kids at one time or another. While this is certainly true, it pays for parents to invest some time and energy into their children’s financial education, teach them about needs and wants, and help them understand the value of saving — things that will only benefit them in the long run.

Headquartered  in Oswego and serving Central New York with branches across the region, Pathfinder Bank believes that with a new school year starting it’s never too early to begin discussing finances and creating a tailored approach to your kids age. Here’s a glimpse at how the financial institution advises parents and kids to get started.

Starting with the Basics

To foster the development of financially healthy adults, parents should begin by explaining some basic concepts about money, such as saving, budgeting, and how to earn. A great place to start is defining needs vs. wants, as solid money management skills begin with making the right purchasing decisions. For example, a teen may want that new bike or popular video game, but they’ll eventually need to pay for a car or finance a college education. With each purchase made, they are potentially taking away from future opportunities, which is why parents should encourage their children to understand and prioritize their wants and needs and save accordingly.

Of course, there’s nothing wrong with children treating themselves to that most wanted item on their wish list — as long as they don’t negatively impact their savings goals. This is where the value of early budgeting education comes in.  It can be a good practice to share why spending limits are important, how their household’s funds are distributed between bills and savings deposits, and how to stick to the budget, even when impulse-buying temptations set in. To give a real life scenario, parents can involve their kids in budgeting for the weekly grocery trip by making a list of items and setting a spending limit. Then at the store, parents can show children how to keep track of how much everything in the cart will cost, as well as walk them through deciding which items aren’t necessary if the haul is more expensive than planned.

The needs vs. wants and budgeting conversations are the perfect segway to discussions on the overall importance of savings. Whether planning for major purchases like a home, looking forward to retirement, or ensuring there are funds available for emergencies, their personal savings account and the interest they earn will play a crucial role in their financial health as adults.

How Kids Can Begin Earning and Saving

It doesn’t matter what age children are — it’s never too early to begin saving, according to Pathfinder Bank. For younger children and teens not yet of working age, they can begin to grasp the concepts of earning and saving by completing household chores, raking leaves for neighbors, running a lemonade stand, and more. Once they receive their earnings, parents should encourage them to save a portion (i.e. 50%), enabling them to practice budgeting and good spending habits with the rest.

Older teens in their first job have even more of an opportunity to form solid financial habits. With a paycheck coming in, parents can teach them about how income taxes affect their budget and what additional expenses they’ll have to anticipate in the future, such as health insurance and retirement contributions.

At Pathfinder Bank, a team of experienced financial professionals is standing by to help families find resources for financial education through our FDIC Money Smart Program  and assist children in starting their very first savings accounts. One option is the Young Investor Savings Account, which is designed for minors up to 18 years old and can be started when the account holder is a newborn. Request more information from Pathfinder Bank today.

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