Parents, I know what you’re going through. You’re probably juggling your attention between your kids and your boss as you work from home. Others of you may be caring for your kids while facing job loss and lost wages. There’s a lot of uncertainty right now, and a lot of it is likely centered on your personal finances.
Now’s a good time to model healthy financial habits and teach our kids how to handle real-world financial scenarios. This not only gives them a lesson of financial wellness, but frees up that bandwidth you need for that next Zoom meeting!
Budgeting
Online grocery shopping
One way I’ve recently liked to grocery shop is to go online and fill my cart with only the things on my list and then pick it up at the store. This keeps me from being tempted to buy things I don’t really need. Now that curbside pickup and delivery options are a more popular choice, you can use it as a great real-world budgeting exercise for your kids.
Lesson plan
Give your kids a budget, say, $35, and a grocery list that includes a few treats they’d like. Have them go through the process of choosing items at the store’s website. Can they stay in the budget and get everything your family needs? How can they save money on certain items to free up money to buy the treats they want? What’s the best value in terms of cost-per-unit? Talk with them about what they learned about shaving off a few dollars here and there by choosing more generic brands or even buying in bulk. What did they learn about needs versus wants? Could they get it all?
Reality Fair for one (or two)
One of the best parts of my jobs is hosting Bite of Reality Fairs at local high schools. These fun, interactive events give teens a chance to experience the real-world financial decisions they’ll face as adults. Each student gets a profile that includes monthly salary, a family, and set expenses including student loan and credit card debt, as well as health insurance. Then they visit various stations to pay for utilities, buy food and baby formula, and maybe have some left over for a new iPhone. At the end, the kids add up their income against their expenses to see whether they’ve stayed within budget.
While not as fun as taking part in a Reality Fair with friends, you can put together a more personal version for your kids.
Lesson plan
Come up with a couple job profiles that lists different incomes, debts, and family sizes. For instance, one could be a teacher who makes $3,500 a month, has a spouse who makes $2,000 a month, two kids ages 7 and 8, a student loan debt and $200 minimum credit card payment debt. Then have your child create a budget for living expense (rent), a car payment, utilities, groceries, personal care for the family, etc. Get creative! If you want to make it more real, base the lesson on your own family’s income and expenses. Lastly go over your kid’s view of how much goods and services cost versus the actual cost. This may be a reality check for your kids and they may just learn why they can’t always get what they want.
Saving money
Every little bit matters
It’s never too early to learn about how saving just a little at a time can add up some serious sums for kids. For instance, how much can you save if you put aside just 50 cents a day? A dollar a day? Letting kids get that “a-ha” moment that shows how steadily saving money can help them reach their goals with little pain will go a long way in their financial education.
The lesson
Start with the theoretical. Have your kids work out how long it would take them to save, say $100. How much would they need to save a month? A week? A day?
Then, create an action plan. If your kids get an allowance, have them start saving small amounts each week. If your kids don’t get an allowance, maybe start sharing the change from the bottom of your purse, or other change around the house to get started.
Compound interest and dividends
Have you ever heard that riddle that asks you whether you’d rather have someone hand you $1 million or give you a penny but double the amount each day for 30 days? While there’s no such thing in the real world as 100% compound interest awarded daily, this exercise shows in an extreme way how compound interest works. Have your child work out the answer to that riddle and afterward they’ll wisely choose the penny every time!
The lesson
Here’s a simple exercise to teach compound interest and compound dividends. Have your child work out the returns on an investment of $1,000 a year earning 5% interest a year over 20 years. How to do it: multiply 1,000 by .05. That gives you $50. Add that to the original $1,000. Now you’ve got $1,050. Multiply that by .05. You’ve just earned an additional $52. Add that to the running total and keep multiplying those new totals by .05. At the end they’ll have a pretty good idea of how compound interest works, and how saving over long periods of times can really add up.
For a quick, more digital method of seeing this, there are calculators online. Find them at
https://www.safecu.org/financial-calculators
https://www.mathsisfun.com/money/compound-interest-calculator.html, https://www.themint.org/kids/compounding-calculator.html,
http://www.webmath.com/compinterest.html
Credit cards and loans
How loan interest works
While compound interest and dividends can help savings grow, interest on loans takes away hard-earned dollars. This lesson is probably one of the most important we can all benefit from. While some purchases for the most part can’t be done without a loan, like a house or a car, showing kids how saving up for other expenses will literally end up saving them in the long run.
Lesson
Give your child an imaginary loan of $10,000 with a 5% annual interest rate and a year to pay it off. First, multiply $10,000 by .05. You’ll get $500. Add that to the loan amount for $10,500. Now divide by 12 to find out what the monthly payments will be. Compare what the monthly payments would be without the 5% interest rate. Have your child explore how different rates affect the monthly payments and how extending the payments out two, three or even five years changes how much is due each month. Remember, though, if extending the loan out several years, be sure to apply the annual interest rate for each year!
Online lessons
SAFE Credit Union is making available financial education and other lessons for families through Everfi. These lessons are free. All you need to do is sign up with your name and school and you're ready to start diving into interactive, engaging lessons.
Financial education websites
Keep on learning at these financial education websites good for all ages.
Themint.org: Find lessons for kids, teachers’ tools, and even a tab for parents.
Incharge.org: Financial education lesson plans for teachers and parents
Treasury Direct.gov: Learn about debt
BrainPop: Lesson plans and worksheets for younger kids
Read more in our Beyond Everyday Banking blogs
How to help your kids with the COVID-19 situation
Resources for employees coping with lost jobs, reduced wages
Why credit unions are a good way to introduce kids to banking
