Economy and Kids!

Opportunities to Teach Your Kids about Finances

Tips from the Washington Department of Financial Institutions

• Needs vs. Wants
  This current economic downturn presents a great time to teach your child about needs vs. wants. If the family needs to cut back explain to your child that they need to cut back as well. Next time your child “wants” an item, start a discussion about the difference between needs and wants. For more information on needs vs wants, see DFI’s Right on the Money.
• Saving For a Rainy Day
  Experts recommend that your emergency savings cover at least 3-6 months of living expenses. Give an age appropriate explanation of what this means and why it is important to save money. If you give your child an allowance, encourage them to set aside some money for savings.
• Budgeting
  A tight family budget can help guide money strapped families through difficult times. Sit down with your child and explain what a budget is and why it is important. If your child earns an allowance, encourage them to set up their own monthly budget. While they are setting up their own budget, explain to them the importance of saving.
• Stock Market & Investing
  Recent losses in the stock market make a great discussion about the risks and rewards of investing. Have an age appropriate discussion about investments and the stock market. Explain concepts such as risk and reward, return, and diversification. For older children, see DFI’s list of 7 free investor education publications.
• Credit
  The media uses the term credit crisis a lot these days. When a good opportunity presents itself, explain to your child what credit and borrowing means. For younger children try and explain key concepts as simply as possible. Explain concepts such as credit cards, mortgages, interest, and debt. If age appropriate explain a little bit about the borrowing process. For more information, see the FTC’s Credit Web site.