1. Get them started with a clear piggy bank
When your kids are young, the easiest way to help them understand money is to give them a cash allowance for completing basic chores, like making their bed or cleaning their room.
Your child’s first allowance is also a great opportunity to introduce the idea of saving. Deposit their earnings into a clear jar or piggy bank so they can watch their money grow over time.
Using a clear bank is important, because it will also help your kids visualize how much their savings deplete whenever they spend their allowance.
Once they’ve saved up enough to buy something they want, have them count out the total cost from their bank and let them hand the money over to the cashier when it comes time to pay.
2. Teach them about interest—the hard way
When your kids are a bit older, you can introduce debit, credit and interest.
Interest might be complicated for your kids to understand, since it’s a not-so-good thing for those who borrow, and a good thing for those who save.
If your child has something that they’re saving up for, you can offer to lend them money to achieve their goal faster, with the catch that they’ll be on the hook for interest if they don’t pay you back by an agreed-upon date.
On the flip side, you can use your child’s allowance to show them the power of savings interest. At the end of each month, sit them down and count up their savings. For every dollar they’ve saved, give them a penny or a nickel in interest.
3. Open up a kid-friendly bank account
Once your kids have been earning an allowance for a few years and have a solid understanding of the basics, it’s time to give them the responsibility of their own bank account.
After opening a new account for your child, it’s important to sit down with them every month to discuss how it’s going — how much they’ve spent, how much they’ve saved, and how much they’ve earned in interest.
If they’re prone to dropping too much at certain stores, some starter accounts will let you put restrictions on where your child is able to use their card.
You can also put a spending cap on your child’s account when they’re first starting out and then increase their limit over time.
Who has the best kid-friendly bank accounts?
There are a number of account options available for first-time bankers, but you’ll likely want to find one that allows you to help your kids manage their money for the first few years.
One great option is Greenlight, a debit card specifically designed to help kids learn about banking.
Greenlight allows you to set up automatic deposits for your kids’ allowance and instantly transfer money to their account anytime.
With the Greenlight app you can control every aspect of your kids’ account usage, including where they can shop, how often they can withdraw money, and how much they can spend each month.
Your kids will also have access to a special version of the app that lets them check their balance and log their chores, making it easy for you to reward them for a job well done.
Right now you can try Greenlight for free for a full month, so sign up today and give your kids the gift of financial literacy.