It is never too early to start teaching kids the necessary skills for financial literacy. Kids who understand how to budget know the basics of setting financial goals and creating a spending plan to avoid falling into debt. By teaching these skills at a young age, you are providing kids with the financial literacy they will need to be independent, successful adults.
Keep budgeting simple for young kids
For preschool-age kids, keeping track of chores, weekly allowance, and expenses does not have to be complex. Create a chore chart that includes the daily tasks your child is responsible for that week. There are many free templates for chore charts online. Use three money jars to store allowance money: one for spending, another for saving and a third for sharing. When your child decides he wants to buy something with his spending money, make sure he is there to watch you use the cash to make the purchase. Also, even though your child is too young to use a debit card himself, when you are out shopping, share with him your debit card receipt to help him understand that the items are being paid for by money in your account.
Find the right tool to teach older kids money management
As kids grow, their chore list and spending habits grow with them. Keeping track of chores, allowance payments and your child’s budget in a notebook or computer spreadsheet can feel like a job in itself. This is especially true if your child wants to do a lot of extra chores to earn “extra credit” on his allowance.
Using educational apps that are structured to teach kids to manage money and are linked to a debit card can help simplify tracking chores and allowance payments. Some apps may include online money management tutorials. For teens, a financial app can also help manage money made through part-time work and takes away the worry that your child is spending all his earned money instead of saving a portion.
How debit card apps work
Debit card apps are connected to a debit card that is issued to your child. The app has two experiences, one for the child and one for the parent. The apps provide a view of when chores have been completed and of the debit account. Parents can transfer money to the card by setting up automated allowance payments and can make additional payments for extra chores that are completed.
The parent side of the app allows oversight of your child’s account. You can view the balance, set limits on spending and change the settings that enable the card to be used at an ATM and online. On the child side of the app, kids set goals for saving and view progress, spend money and see how much they have spent and where. In many apps, kids can also give small amounts of money each week to a charity. If your child loses a card, it can be blocked immediately. The debit account is FDIC insured and cannot be overdrawn.
Teens who are ready to learn about investing and trading stocks may be interested in the investing tools that can be added to some apps, such as Greenlight, for an extra fee. Also, some financial institutions, such as Fidelity, offer free brokerage accounts for children of account holders.
Some of the paid apps, such as GoHenry and Greenlight, have a free trial, but after it expires, a membership fee is charged. Read the fine details on the list of app costs to determine what services may incur additional fees.