One of the important life lessons to come from these past two years with COVID is that families need to be financially prepared for any life changes.
You did this when you started your Ohio 529 account for your child. You took the smart financial steps to start savings for whatever education comes after high school. 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 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 to save for the trip, you can discuss where, as a family, to reduce 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. And learning how to create a budget is a critical life skill.
If your children are young, introduce them to basic budgeting concepts with spend, save, give and share jars. They can watch how Elmo from Sesame Street saves in those three jars. After they have earned money from completing chores or from receiving their allowance, talk to them about the value of saving now to have it grow for use later, having a plan on how you want to spend the money that they have now, and how to caring means sharing their funds with people and organizations that your family values.
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. Another idea is to give your teenagers the money you had set aside to pay for their school clothes for the year so they can choose how to spend the funds. This way, your teenagers can see how much or how little they can buy with the money and it will all be dependent on their own personal spending decisions. It’s better for them to learn what things really cost now so to better set their financial priorities later in life. For your teenagers, it might be wise to research personal finance apps so they learn how to manage their money now through these resources.
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 as a family? Board games are fun and can include valuable life lessons, too. 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. For a more comprehensive list of board games to teach personal finance skills at different ages of your child’s development, this article lists 53 options. As your family plays these games together, your children can learn core financial concepts to 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.
529 plans are for whatever school comes after high school for your children. Funds in a 529 account can be used tax-free for qualified higher education expenses at four-year colleges or universities, two-year community colleges, trade or vocational schools, apprenticeships, or a certificate programs. So your children can go to a school where their interests, talents, and skills lay.
With student debt burdening many families, 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.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever school comes after high school. Learn, plan, and start with Ohio’s 529 Plan today at CollegeAdvantage.com.
This article was originally posted in June 2020 and has been updated to reflect new information for 2022.