Parents have an essential role in shaping their children’s financial future. Educating your kids about budgeting and saving can lead them to financial responsibility and success down the road.
Are you wondering where to begin? We understand teaching your kids about finances can seem overwhelming. We’re here to serve as your community partner in financial literacy and resources — in other words, we’re here to help!
The Fidelity Federal team has curated a practical list of ways to start the conversation and open the doors to the fundamentals of financial literacy for your growing child.
Financial Tips for Younger Children
Talk About the Value of Money
Before diving into the complexities of budgeting, ensure your child understands what money is and its value. Use everyday opportunities like grocery shopping or dining out to discuss costs and spending decisions. You can start talking to your kids about money around the age of five and continue to involve them in conversations as they get older.
Implement the Envelope System
One of the easiest ways for kids to learn budgeting is through the envelope system. Label envelopes with categories such as ‘Save,’ ‘Spend’ or ‘Give.’ Whenever your child receives money, whether it’s an allowance or a gift, help them divide it among the envelopes or even piggy banks if your child has them.
This visual and physical method reinforces the concept of allocating funds to different purposes. As your kids get older, you can move the funds out of envelopes and into checking and savings accounts, as well as money market deposit accounts (MMDAs) or certificates of deposits (CDs).
Set Savings Goals
Setting savings goals can be a fun and effective way to teach children about delayed gratification. Help them identify a goal — a new toy, a trip to the amusement park or a phone — and then calculate how much they need to save each week or month to reach that goal. This also introduces the idea of saving for more significant, long-term goals.
Celebrate Milestones
As your children make progress, celebrate their milestones. Whether reaching a savings goal or sticking to their budget for a set period, positive reinforcement encourages continued financial responsibility.
Budgeting Tips for Teens and College Students
Lead by Example
Children often mimic their parents’ behaviors, so set a good example. Share your experiences with budgeting and savings, including both successes and failures. Let them know that budgeting isn’t about restriction but about making smart choices to achieve financial freedom and security.
Learn how to build an emergency fund >>
Make Budgeting a Family Affair
Involving your kids in the household budgeting process makes the concept more relatable. Break down your family’s budget, showing how you allocate funds for necessities, savings and discretionary spending. This transparency helps children grasp the balance required between spending and saving.
Get tips on how to open your first checking account >>
Open a Savings Account
Once your child understands the basics of budgeting, opening a savings account is a logical next step. It teaches them about bank transactions, interest and the benefit of saving over time. Involve them in the process of choosing a bank and the type of account. Educate them about how interest works so they can see their money grow.
Encourage your child to deposit money regularly, even if it’s a small amount. Many banks, like Fidelity Federal, offer youth accounts with no fees as long as you maintain a small minimum balance. Banks can also provide educational materials and interactive games tailored to young savers. This practice instills the habit of saving and can lead to deeper discussions about financial planning and investing.
Check out Fidelity Federal’s financial literacy resource page >>
Encourage Hands-On Experience
For older children and teenagers, consider giving them more responsibility, like managing a budget for certain expenses such as clothing or extracurricular activities. This hands-on experience is invaluable.
You can also establish an allowance for your kids to perform household chores to earn money. Factor in what’s age-appropriate and whether or not you want to tie behavior or schoolwork to their allowance. There isn’t a one-size-fits-all approach to allowances, so make sure you do what’s best for your child, and feel free to adjust if necessary as they age.
Teach Them About Credit
When your kids are old enough, typically in their teenage years, introduce them to the concept of credit. Explain how credit cards and loans work, including the potential risks like debt and interest charges. Use positive examples of credit usage, like disciplined credit card handling or taking a mortgage for a home.
By teaching your kids the importance of budgeting and the power of a savings account, you empower them with tools for a lifetime of financial well-being. Remember, it’s not just about the money — financial literacy is about fostering decision-making skills, self-discipline and confidence in their ability to manage their financial future.
Open a Savings Account at Fidelity Federal
View our savings account options at Fidelity Federal today to explore which is right for you or your child. Send us a message if you need help or have questions.
