How to Teach Kids About Banks
Children are more likely to make sound financial decisions later in life if they learn about the basics of personal finance at a young age. Get your child headed in the right direction by teaching her about banks. The banking system provides a lot of options to save or invest money. Educate your child about banks and the options they provide to ensure that she will have the knowledge to utilize banking services when the time comes.
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Instructions
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Create a model bank. Using a piggy bank or another container, set up a model bank for your child. Explain to him that when he puts money in the piggy bank it is like depositing money in a real bank. Tell him that a real bank, like a piggy bank, keeps all of your money together and keeps it safe.
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Set up a financial journal. Help your child keep track of her money the same way you keep track of your money in your check register. Using a notebook or pad of paper, help her write down her income from things like allowance, chore money or gifts on one side of the page. List her expenditures, or money she spends, on the other side. This will encourage saving and give your child the opportunity to practice keeping a register just like with a real bank account.
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Show the benefit of saving by making interest payments. Add a second piggy bank and label it "savings." Tell him to deposit money in this bank when he wants to save up for a larger purchase. Explain to him that by depositing money in a savings account, he can earn interest. For every dollar he has in the bank each week, add a dime so that he can see that depositing funds in a savings account is a beneficial practice.
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Graph fund growth so your child can see the results of saving. Work with your child to create a graph to illustrate the funds in her savings account. Place the time in weeks on the x-axis and the amount of money on the y-axis. Then create a simple line graph. Over the course of a month, show her how the practice of saving is allowing her to amass a large amount of money.
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Allow your child to take out a loan from you, if your child wants to buy something special. Explain that sometimes you want to buy things that you don't have the money for, so you have to take out a loan. Tell him that you will loan him the money but that he will have to pay a little back each week. Charge him small interest payments to show him that taking out a loan makes the item purchased more costly.
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Open a bank account for your child, once she understands the basics of banking. Going to the bank and setting up an account can be a thrill for a child. Also, it will encourage her to put money away and not spend it frivolously.
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Tips & Warnings
If you want your child to make sound economic decisions, model these decisions. Demonstrate how to properly budget your money and allow your child to see you plan and save for large purchases.
References
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Comments
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a great help!
