Kids have lots of questions about the world around them—especially as they bear witness to a pandemic and a historical economic downturn. It’s hard enough to juggle working from home while managing snack time and overseeing Zoom classes, but this unexpected together time can be a good opportunity to teach kids important life lessons. Maybe even some lessons we wish we learned earlier in life, ourselves.
Here’s how to make sure you’re financially stable and teach your kids money lessons, from year one to 10.
The First Year: Think Long Term
When your child is born, your attention is probably absorbed by swaddles and sleep timers, and stroller attachments. But now’s actually a great time to apply for term life insurance, if you haven’t already, and to start thinking about a college savings plan. Taking care of these things now means you can feel more secure sooner—and get back to cuddling that little mushball.
1-Year-Olds: Look for Reward Points
At one year, babies expand their nutritional requirements. If you’re looking to further optimize your grocery budget, consider looking into credit cards with reward points at the grocery store you shop at. Even small amounts can add up over time.
2-Year-Olds: Have the Money Talk & Have It Regularly
It’s important to stay on the same page with your partner when it comes to your family’s finances. And with the kids always around these days, it’s a good opportunity to explain that you and your spouse talk regularly about your finances, your values, and what’s most important for your family.
3-Year-Olds: Create (or Update) Your Will
The first few years of your child’s life have been busy. We get it. But a last will and testament gives you the chance to state who should look after your kids if something were to happen to you. With Fabric, you can create a will online or via the app in minutes, learn how to make it legally binding and share it with your partner.
4-Year-Olds: Start Thinking about Allowance
The right amount varies by family, but a ballpark might be $1 per age (meaning $4 for a 4-year-old) each week. The goal of allowance at this stage is just to get your child used to basic concepts around how money works, understanding the importance of saving—and delayed gratification.
5-Year-Olds: Explain ‘Wants’ vs. ‘Needs’
While you’re online shopping, especially during the upcoming holiday season, pause to discuss whether purchases are wants or needs. Explain why you’ve decided to buy certain items. It’s also a good idea to make it clear that your child’s allowance should go toward purchasing “wants,” while you’ll still cover the family’s “needs.”
6-Year-Olds: Make Money More Visible
To help jumpstart your kids’ financial literacy, next time you take your credit card out or start to pay bills online, pause. Call your child over to explain what you’re doing and how it affects your family’s finances.
7-Year-Olds: Share Household Responsibilities
Your 7-year-old is capable of completing some household chores. Assigning little tasks will lighten your load, prepare them to be a responsible adult and teach them that life requires hard work.
8-Year-Olds: Talk about the Cost of Extracurriculars
At 8, children often begin to exhibit unique interests and talents. Start teaching your child to think critically about spending by explaining how you’ll be budgeting, comparison shopping and weighing cost-benefit trade-offs for those fun activities.
9-Year-Olds: Discuss Equality
By 9, kids are noticing the differences between how people live. Use your child’s observations as an opportunity to discuss money, especially given the uneven impact of this recession. Consider finding a charitable cause for your family to donate money and/or time to, demonstrating that while inequality is unfair, we can do our part to combat it.
10-Year-Olds: Check-in on Your Rainy Day Fund
As of late 2019, almost 40% of US adults would not be able to cover an unexpected expense of $400 without taking on debt. Take the opportunity to ensure you have enough liquid savings to cover at least three to six months of expenses; if you don’t, set a goal to get there. Without scaring your child, explain that even in the best of times it’s important to have a rainy day fund in case of a financial emergency like job loss or a health crisis like Coronavirus.