For kids, October is a big month because it includes the one night where costumes are encouraged and begging for candy is expected. But it’s also National Financial Awareness Month, and amazingly, many teenagers will graduate high school this year with little knowledge about how finances work, flying blind into a hurricane-sized storm of potential debt, bad loans, bankruptcy, and no savings or retirement.
As a parent, you can head this off. To help, the makers of BusyKid, an app that tracks kids’ chores and allowance, are offering families tips and financial basics for getting started.
• Chores. Introduce chores early and treat them as if it’s your child’s first job. By changing the mindset around chores, kids can develop a good work ethic that can carry over to a real job.
• Modern Money. It’s estimated that less than 10 percent of the world’s currency is actually paper or coins. This means your child needs to know how to manage invisible money, including paying bills and tracking credit and debit card spending.
• Savings. Thirty-nine percent of Americans admit to having no money in a savings account. Teach children to save a portion of money they receive from birthdays, holidays, babysitting, mowing grass, etc. A good rule of thumb for kids: 50 percent savings, 40 percent spending and 10 percent sharing.
• Sharing. Contributing to non-profits not only feels good but helps others in need. It could also provide a tax benefit when your child is old enough to be filing.
• Investing. If your child ever wants to retire, he or she will need to invest money along the way, and practice makes perfect. Luckily, there are resources available to teach them how, including some fantasy investing games, as well as apps like BusyKid, which provides a place to buy real shares of stock for as little as $10.
• Compound Interest. Compound interest is when a bank pays interest on both the principal (the original amount of money) and the interest an account has already earned. As an example, if you put $1000 in the bank with compound interest of 10 percent, in 20 years you’ll have more than $7,000. Without compound interest, it would be $3,000. Let your money make money!
• Credit Cards. This is not free money! Have one card for emergencies or travel, but make sure the annual percentage rate is low and is paid off monthly. Your kids will be flooded with offers as soon as they’re old enough, so teach them to say no, even when promised gifts for signing up.
• Student Loans. The U.S. student loan debt is currently $1.45 trillion (an average of $37,000 per student) and nearly 7 million loans are in default. Follow this simple rule — don’t borrow more than your child will earn in his or her first year out of school.
For more money management knowledge and practice, enroll your family in BusyKid. Visit www.busykid.com for more information.
This National Financial Awareness Month, take steps to prepare your child for a successful future.