You’d think it’d be on the list of critical subjects taught in school, but managing money is one that largely eludes today’s youth. Parents don’t need degrees in finance, however, to pass on basic money know-how that will benefit their children for the rest of their lives.
I asked Gregg Murset, a certified financial planner and founder of BusyKid, an app that teaches kids the basics of personal finance, for his advice about teaching children about money. Here’s what he said.
The Epoch Times: Today’s levels of credit card debt, student loan debt, and insufficient savings reflect the need for us to better educate our children about managing finances. Overall, what key financial concepts should parents be teaching their children?
Gregg Murset: Concepts are great, but for most kids, still way too complicated.
For younger kids, they should understand the difference between “wants” versus “needs” and that you should save more than you spend. You also want to help them understand the value of money by sharing experiences when you go shopping or pay bills online.
For teens who already understand money and the value of things, it’s a bit different. Financial concepts tend to become real for the first time the moment they land their first job.
Did anyone ever explain taxes, Social Security, or retirement until you filled out the employment forms for the first time? By this time, your teen should have a bank account, debit card, and money in savings. If you never used a system like BusyKid, then talk to your child about the importance of breaking up their paycheck (after taxes) so 40 percent is spent, 10 percent is donated to charity, and 50 percent goes into savings.
The Epoch Times: The first thing parents often think of when it comes to teaching their kids about money is a weekly allowance. What chores and allowance strategy do you advise parents to follow?
Mr. Murset: Here’s only one strategy: Kids do chores and earn an allowance for completing them.
We recognize there are many different views on these topics, but it’s more important to focus on what chores and allowance give our kids. Chores teach work ethic, responsibility, accountability, and time management.
Allowance provides money, our kids need to begin learning how to manage it. Think of chores and allowance as your kid’s first paying job with you (the parent) as the employer.
The Epoch Times: Your app BusyKid allows parents and children to manage their system of chores and allowance. What inspired you to create BusyKid?
Mr. Murset: Real life inspired it.
I was looking for a way to get my six kids to understand how to manage the money they were earning from chores. They weren’t learning anything about money in school, and as a certified financial planner, I see firsthand how the lack of financial education hurts parents, so BusyKid was born. Now, kids get the hands-on experience they need in order to manage money the right way before facing overwhelming financial decisions as adults.
In BusyKid, kids earn an allowance and then make decisions on how to manage it, including saving, donating to charities, and investing in real stock. We believe kids using BusyKid regularly will develop a solid routine for managing money.
The Epoch Times: Once kids begin to accumulate money, how can parents best help them manage it?
Mr. Murset: Inside BusyKid, kids really do make the decisions on how to manage the funds, however, they still have a safety net—parents.
Parents have the final OK whenever money is moved outside the system for cash, a donation, to buy stock, or for how much money is placed on the BusyKid Visa Prepaid Spend Card. The best way for a parent can help a child manage money is by having a conversation on why the funds are being moved or what’s the best use of the funds.
The Epoch Times: What are some of the biggest mistakes you see parents making with it comes to teaching their kids about money?
Mr. Murset: Probably the two biggest we see are parents thinking that their bad financial history doesn’t qualify them to teach their kids, and parents that will stop doing whatever it is to teach about money because their child refuses to go along with the plan.
For the most part, parents today have about the same financial education as their kids, so it’s not surprising that bad decisions have resulted in bad credit scores, large debt, and no savings accounts. Still, we feel that children can learn valuable lessons no matter the parent’s history, and parents should embrace the opportunity to share their history with kids old enough to understand.
The Epoch Times: What should families with teens consider when deciding whether or not to take on student loans?
Mr. Murset: As children approach high school graduation, there’s usually a conversation about college and how can they attend the college of their dreams. Many times, parents never stop to ask, “Does it really make sense?”
When it comes to college, maybe parents need to revisit the “want” versus “needs” discussion. Considering student loans is serious business, especially for the loan issuer.
I believe student loans should be a last option, just ahead of not going to college at all. If you presently have a young child, start putting money away now for when this time comes. If you must take a loan out for college, take the least amount possible, though it’s tempting to take more. Also, make sure to take your future earnings into account. Should you really take $80,000 in loans when you’ll make about $30,000 as a new teacher (depending upon where)?
The Epoch Times: For parents who’d like to begin teaching their kids about money, what’s the very first thing you’d recommend they do?
Mr. Murset: Do something—anything—and stick with it.
Getting kids the hands-on practice they’ll need to learn managing money takes time. Kids will be kids, so expect some pushback. However, if they see their savings account grow and have the ability to buy things with their own money, the motivation to keep going will be there.