Teaching kids about interest with bank accounts and saving money isn’t easy. This is something that may work best in visual, hands-on approach.
Today we are sharing a few tips on how you can work to teach your kids about interest. It’s important kids learn how to be responsible with money and how to invest it properly into a savings account or, as they get older, a retirement fund.
Here’s our advice to get you started in the direction of teaching kids about interest.
Set Aside a Percent
Each week when you pay your kids their allowance, have them set aside a certain percent that you will document as interest. This amount will help teach your kids about how interest works. This can be a great way to teach kids the concept of interest, while encouraging them to use this method to save extra cash. Work with your kids to determine an appropriate percentage to set aside and watch as they start to comprehend how interest works.
Give them a Bank Account
Have your kids set up with a bank account that accrues interest. This usually happens with a kids savings account or a higher yield interest-bearing savings CD at a local bank. Determine which bank account option will work best for your family and then have the kids be a part of documenting interest as it accrues in their bank account. This is a good hands on approach to allow them to visualize how interest can be a positive to their money management goals. You can use Homey app to deposit savings and their earned money to their bank account.
Give Them a Loan
As your kids get older, such as during the teenage years, they may need extra money for Drivers Education or a big ticket item. When the kids are in their teen years, it’s the best time to teach them about personal loans. If you are able to, create a loan agreement that includes payback plus interest so that your kids will learn about the outcome of taking a personal loan. As they enter into adulthood, they will have already had enough practice with paying back plus interest to make better loan decisions.
Show Them Credit Card Bills
Lastly, sharing some of your credit card bill statements with your kids can truly give them an experience of what interest does. With credit cards, many consumers have a flat interest rate that is charged on top of whatever they spend with the credit card. Sharing your monthly credit card statement with your kids is the perfect way to give them a visual experience of how to properly spend cash on a credit card while taking notice of the interest rates.
These ideas are super simple, but when it comes to teaching kids about interest as it pertains to money management, the best methods are visual and hands-on techniques. Kids are often lectured about various things in life when it comes to teaching kids about interest; this subject is best taught through experience.
About the Author – Brandy Ellen Tanner is a Positive Lifestyle blogger who works from home while raising her 3 children. Learn more about Brandy at BrandyEllen.com and read her other parenting articles at ParentInfluence.com.Tags: finance for kids, financial literacy, finlit, interest