Published in: Banks | March 18, 2020
4 Financial Lessons for Kids During Distance Learning
By: Maurie Backman
Kids home from school? Take the opportunity to impart some valuable knowledge.
Now that schools nationwide are shut because of COVID-19, millions of parents are grappling with the reality of having their kids learn at home. For many children, that means logging onto an e-learning platform and reviewing the concepts they've been going over in school, and possibly submitting homework assignments online. And while this setup is no doubt challenging for working and stay-at-home parents alike, no matter which category you fall into, you have a real opportunity to use this time to teach your children a few important money lessons. Here are four to start with.
1. How to create a budget
Children generally don't think about budgeting, since they're not the ones charged with paying bills. But if you teach your children how to budget when they're young, there's a good chance they'll continue doing so when they're older.
You have two choices in terms of showing your kids how to budget -- create a mock budget based on made-up numbers, or share your actual household budget. The latter may be more effective, and may prove more engaging. By reviewing your household bills and showing your children how you prioritize your spending, they'll get a sense of what's more important (food, shelter, and other basic needs) and what's less critical (cable, leisure, and fun purchases, like toys and games).
2. How bank account interest works
The idea of free money may seem really cool to your kids, and that's pretty much what interest is all about. To illustrate the concept, you can pull up your savings account history on screen (assuming you do online banking, which many families do these days) and show your kids how your balance has grown thanks to the interest payments you've collected. Better yet, open an online savings account for each of them so that they can track their own interest over time. Many savings accounts come with no minimum balance requirement, so you can start each of your children with as little as $50, all the while encouraging them to put future windfalls, like birthday or holiday gifts, into their own accounts over time.
3. How credit cards work
You've probably pulled out a credit card in front of your children and used it to buy groceries or gas for your car. Now is a great time to explain what it means to swipe that piece of plastic. Sit your kids down and review the basic concepts of credit cards -- that you are given a credit limit that caps your spending, you get to charge expenses during the month and pay your bill at the end of it, and that any part of your balance you don't pay starts to accrue interest immediately. In fact, you can compare the bad kind of interest -- that of the credit card variety -- to the good kind -- the type savings accounts pay.
4. How taxes work
Your children may hear you complaining about taxes from time to time, but they probably don't understand what taxes are. To explain, have your children do an extra chore at home and offer to pay them a preset amount -- say, $5 each. But tell them there's a catch -- they'll be paying taxes on their earnings. Then, once they're done, hand over $4 and explain that the missing dollar went to taxes. If your children are older, you can then explain that different people pay different amounts of tax on their highest dollars of earnings based on the brackets they fall into.
It's not easy to have children stuck learning from home, but for the time being, that's our reality. But look at the bright side -- you have a real opportunity to turn into kids into financial experts in the process.
These savings accounts are FDIC insured and can earn you 20x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 20x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2020.