Practical Finance Tips for Tweens

It is never too early to begin educating kids about finances. For the children you teach (at school and at home), a strong financial foundation will benefit them for their entire lives. However, engaging them in this normally dry subject full of complicated concepts poses plenty of challenges. Similar to using inventive ways to develop math skills, taking a different approach to train money management can improve retention. This is why dynamic and hands-on lessons are key to getting your kids involved with finances.

Fortunately, there are a variety of ways to involve children of all ages in financial education. From real-world budgeting to safely building credit to saving for emergencies and retirement, starting early is essential.

Use Real Money and Real Situations

Hypothetical lessons are a great starting point. As teachers, though, you understand that children often respond better when they can connect the lesson to their own life. Design lesson plans around real-world situations, and use real money if possible. When it comes to proper budgeting, ask children to set their own goals for saving and spending. Give them relatable income and expenses, like a weekly allowance and a gaming subscription, as well as unexpected expenses to overcome.

Tweens, in particular, will be ready to incorporate technology into their finances. Showcase online banking and finance apps to highlight how tech can make financial management accessible. For teachers, interactive lessons can be framed as games or mimic real-life events, including filing taxes and calculating tips at restaurants.

If possible, encourage parents to allow children to use what they've learned in the real world by getting involved in finances at home. For more mature tweens, parents can provide insight into the home's finances for a period of time. While they don't need free reign over the credit card, they can learn how to schedule bill payments, plan monthly budgets, or even make grocery purchases. These situations also create perfect moments for teaching and guidance, while allowing tweens a behind-the-scenes look at day-to-day money management.

Ensure a Healthy Knowledge of Credit

Credit card debt is be a pitfall that young people often fall into. From predatory rates for unexpecting students to a general lack of knowledge, young people have credit misconceptions.

At first glance, a first-grader may have no use for credit card awareness. However, there is more to proper credit usage than paying the monthly minimum. Early on, it's important to illustrate that credit is not free money. It's a loan that has to be paid back in a certain amount of time. Additionally, focus on shapeable soft skills. Critical thinking and investigative skills will help young people navigate the world of credit too.

Parents should start discussing the importance of building credit with their tweens as soon as they can. Explain credit history, along the factors that go into building good credit: making payments on time, using credit responsibly, not applying for more credit than you need. Then talk about how you need credit to finance a car, secure a business loan, or qualify for a mortgage.

Even before they hit 18, they can be added as an authorized user on a credit card, which allows them to benefit from your positive credit history. Then, when they turn 18, consider helping them apply for their own secured credit card account. With prepaid credit limits, these cards are perfect for new users to build and understand how credit works. Showcase how the process works, especially the concept of credit-borrowed funds and the importance of making payments on time.

Like other financial lessons, it helps to tie credit concepts into real-life situations. If your child is notorious for forgetting to clean their room, explain how that is similar to not paying off interest. Note how both situations can snowball into larger problems. Or, talk about how the growing laundry pile is similar to mounting debt. Parents can even use "house credit" to put these lessons into practice. Like all credit, establish the terms and consequences of "missing payments." Chore debt might become a common term in your home. Focus on achievable goals, and reward them when their credit score reaches a milestone.

Don't Overlook Life Lessons

In a world where everything from clothes to electronics have become almost disposable, teaching your child the valuable life lesson of taking care of their belongings is one of the most important financial lessons of all. Simply put, properly maintained items save you money because you don't have to repair or replace them as often. Most children will understand the concept of routine car maintenance, for example. However, it's important to connect delayed maintenance to the difference in costs between a tire rotation and buying four new tires.

At school, teachers might consider creating safe toolboxes for each student. Teach what each tool does, and when to use it. Create safe and practical projects, such as measuring boards with tape measures. Or, have each student create personalized household maintenance schedules. Integrate this maintenance into the classroom. Watering plants and dusting are just a couple of easy lessons to instill the importance of upkeep.

For parents, leading by example is a good strategy. Involve your children in maintaining your home, inside and out, and teach them how much required repairs actually cost. If there is an upcoming maintenance need, include your children at every stage. Begin with any needed research, such as looking for parts or using online cost calculators. Let them know that it can cost up to $1,800 to replace a single window. And, when it's time, let them help install it. Once they are on their own, they will think twice before throwing that baseball indoors, knowing they will have to foot the cost.

Older children can get even more hands-on. When you need to purchase a new car, for example, bring them along. Show them how to properly research the best deals for the type of vehicle you want. Teach them how to shop around, and walk them through the financing process. And, if you plan on trading in your current vehicle, explain how a clean and well-maintained car is worth more. This teaches children to associate maintaining their belongings with saving money.

Teaching kids valuable finance skills can (and should) happen both at home and in the classroom. Using real-world financial situations as lessons can help kids learn how to budget, highlight the importance of credit, and encourage responsibility down the line.

Guest Blogger:

My name is Ann Lloyd and I'm a newly enrolled MBA grad student. I'm getting my degree online and working as a marketing intern on the side. In my spare time, I'm hard at work on the Student Savings Guide, my blog about living a budget-conscious life. The guide caters to students and recent grads, but anyone can use these tips to get by.