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When you started your 529 plan, you took the smart financial steps to start your college savings contributions. In addition, you most likely reviewed and updated the family budget, paid off debt, and started your retirement savings. These are wise monetary decisions you made to improve your family’s life.
Maybe a family member taught you the basics of personal finance. Maybe you learned about it in school. Maybe you’re self-taught by mistakes made along the way. Or, maybe you hired a financial advisor. In any case, it’s smart and caring to share your learned money skills with your children.
While we are experiencing more time together, take advantage of it to teach your children some crucial money lessons now that will positively impact the rest of their lives.
Lead by example
As you know, children are sponges so lead by example. While they are young, include your children in your decision-making process when it comes to your family’s budget.
If you are doing your grocery shopping online, it’s a great opportunity to show your children how to work within your food budget. You and your child can start by looking around at your pantry and refrigerator and make notes on what needs to be replenished. You can discuss with your child what your budget will be for the groceries and how long the food items will need to last until the next time you shop. It’s also a great time to teach them the difference between a need and a want. They may want those potato chips, but you need to buy milk instead with those dollars.
Then jump online and use your grocery store or delivery app with your shopping list. Together, start looking for your food items. As you keep adding to your cart, have your child keep an eye on your growing total. Once you reach your budgeted dollar amount, it’s time to stop. If there are still items you need to purchase, you and your child can decide together on what to put back in order get the necessary items. While doing this, it’s a great time to discuss a need vs. a want. Later, if they want a treat while checking out, then tell them that they can spend their money for it. This will show them the true cost of not-budgeted item.
When paying you bills online, have your children sit by you so they can start to see the costs of running the home. They might start to understand why you are constantly reminding them to turn off the lights when there’s no one in a room!
You can also include your children in deciding on how to save for a major purchase, like a vacation. Show them what you expect the costs to be, including travel, accommodations, entertainment venue ticket costs, food, and fun gifts. Once your family comes up with a total that needs to be saved for the trip, you can discuss where, as a family, to cut back on expenses to have an incredible vacation. It’s an opportunity to show your children that even fun things come with a cost and you need to save for them.
Your children needs to learn that money is not a freely given gift; you earn money through work. The simplest way to teach this concept is through household chores. You can either pay for each completed task or pay your children’s allowance once they have finished their assigned chores.
When your children are young, have them do easy tasks like straightening their bedroom, sweeping, and dusting. If your children are older, they can do more strenuous household chores, like cooking, cleaning the bathroom, and vacuuming. In fact, cooking together can be a great money lesson. With your child, add up the costs of the ingredients and divide it by servings for a cost per meal. Then look at online menus to see how much the same meal would cost at a restaurant or for carry-out. It’s a real eye-opener to see how expensive it is to eat out and it’s a great lesson to learn early.
Develop budgeting skills early
A budget tells your money where to go. If your children are young, introduce them to basic budgeting concepts with spend, save, give and share jars. They can listen even listen to Elmo from Sesame Street can talk about those three jars. If you have teenagers, show them how to set up a budget to pay for their smart phone bill, buy gas when they borrow the car, donate to their favorite charity or save for their higher education. Learning how to create a budget is a critical life skill. Dave Ramsey offers some advice on how to teach your older children valuable life lessons on how to use money.
For guidance on money lessons to teach your children at every age, this article shares good suggestions to grow their life skills.
Are you playing a lot more games during this stay-at-home time period? Family time can include some valuable life lessons, too. While playing board games, choose ones that teach basic principles of personal finance, like the Game of Life, Pay Day, or Monopoly. There are also games that specifically focus on money management techniques like Cash Flow 101. If you’d like more ideas for board games that can increase your family’s money skills, this article lists some different ones available. While your family competes, they can learn core financial concepts that can help them in the future.
Saving in a 529 plan
Let your children know that you are saving for their future higher education. If possible, have them contribute to their own account. You don’t need to share the dollar amount saved in your 529 plan, but set your expectations with them – that they will be continuing their education after high school.
Research from Institute for Higher Education Policy shows that when children know that there are college savings set aside for them, they are much more likely to expect to attend college. In fact, children with $1-$499 in college savings are three times more likely to attend college and four times more likely to graduate than those with no savings.
And 529 plans can be used at four-year colleges or universities, two-year community colleges, trade or vocational schools, or a certificate programs. So your children can go to a school where their talents and skills lay.
With debt crippling many families now, it’s critical that you teach your children these valuable life skills while they are still in your home to set them up for financial success later in their lives.
A 529 account can be used for whatever comes after high school. If you’d like to do more research, explore Ohio’s 529 Plan —The Plan That Can — at CollegeAdvantage.com.
Posted on June 4, 2020