Ask HN: How do you teach kids the basic finance skills?
I have been wondering about this for a while. I grew up without any kind of financial education. To be honest, in my 20s, when I moved out of my parents' house, I didn't even know what exactly is necessary to pay the bills. So, what resources would you suggest to teach kids basic finance skills? I'm thinking about things like paying taxes/bills, a little bit about investing, how to not get screwed by student loans, and similar.
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[ 2.3 ms ] story [ 11.3 ms ] threadTalk to them. Give them chances to practice. Show them examples. Don't shelter them from the fact that you spend/save/invest money or from how you spend/save/invest.
Give them an allowance and a class of purchases that can be bought only with the allowance (Toys? Sweets?) Expand the allowance and the class of purchases as they get older and take responsibility for things like choosing their own clothing. Help them develop a budget for saving and spending.
Reward them for saving. Pay interest on their savings. When they're old enough, demonstrate the power of compound interest. Both working in their favor and working against them. (My parents once demonstrated this using cheerios instead of money.)
Have them sit with you as you pay your bills. Explain how they work, why you pay them on time, etc.
Invest a few hundred or a few thousand dollars into some savings bonds and index funds in their name. Let them monitor but not manage the money until they reach adulthood. Explain the investments to them and why you chose those particular ones.
If they're reasonably mature and reliable, get them a co-signed credit card at some point in high school, to be used for emergencies and pre-approved classes of purchases only. If you're concerned, ask the bank to put a low credit limit on it.
Have the kid pay off (with money you provide, if you're not comfortable giving them that much in allowance) or sit with you as you pay off the full bill every month. Show them how much more they would have to pay if they paid it late or paid only the minimum balance. This teaches them good habits; and having their name on the card helps them establish a credit score so they can get credit immediately upon reaching adulthood.
Show them the tax forms you send in for them every year. Explain what taxes are for and the basics of things like deductions, pre-tax expenses, tax free accounts, pre-tax and post-tax income, withholding, estimated taxes, and the like. If you file their taxes yourself instead of getting third party help, have them sit with you as you do it; later, have them do it themselves under your supervision.
Talk to them about the financial decisions you have to make (Car loans? Mortgages? Large purchases? Retirement savings?) and how you make them. Talk to them about the good and bad decisions other people make - show them news articles for examples.
Once the kid's savings reach a couple hundred dollars, get them a co-signed bank account. Have them do the math to balance the checkbook, old fashioned as that may be. When they reach adulthood, turn it over to them fully. Also help them choose and sign up for a credit card of their very own.
Show them examples of why they should never use a financial instrument they don't fully understand. Encourage them even as adults to turn to you if they have trouble understanding a financial instrument or making a financial decision.