Parents in the financial world today are bombarded with financial decisions. One of the most important financial lessons a parent can teach their child is how to manage money responsibly and make good financial decisions. These skills will serve them well as they grow up and start managing their own finances on their own, but it's not always easy for parents to know where to start.
That's what this article is about: helping parents to understand what tools exist for children that can assist in developing these skills while still providing a level of control from the parents. Further, the article will provide an overview of how to teach your kids good money habits so that you're never left wondering if they'll be able to survive out there on their own!
What is Financial Literacy?
Financial literacy is the ability to understand financial concepts and information. It is a set of skills that includes the following:
- understanding financial terminology
- making decisions about how, when, where and why to save money or spend it
- knowing what financial planning tools are available (such as bank accounts) for different stages in life
Financial literacy gives children the tools they need to be responsible financial citizens.
Parents teaching financial literacy to their kids is important because it provides them with the tools needed to make good financial decisions from a young age. This will help ensure that their kids are able to manage money responsibly throughout adulthood.
It also means that they'll be able to make financial decisions for themselves when the time comes and you won't need to stress over their ability to navigate these situations.
The bottom line is that financial literacy provides a sense of control and security for both kids and parents alike, because it means your child will know how to manage their money responsibly from an early age onwards.
How Can Parents Help Their Children Grow Financially?
Parents can help their children grow financially by:
- Teaching financial literacy from an early age.
- Supplementing any financial education received in schools and other community associations for kids to learn these skills.
- Making a personal financial plan
so that they know how much they need to save each month, what percentage of their income should go into savings, etcetera.
The best way parents can help their kids grow financially is to give them the financial skills they need.
This includes teaching financial literacy, but it also means providing a sense of control by giving your child some basic financial tools like reloadable prepaid debit cards for kids
so that they can only spend money held on the card and not risk overdrawing an account and incurring costly charges from the bank
Further, these cards can aid parents by providing useful parental controls over how and where kids spend their money, insightful real-time spending and ATM withdrawal alerts and even help managing chores and allowance systems.
Thankfully, several Fintech companies have entered this market to assist parents with such controls and functionality. To primary competitors, Greenlight Debit Card
and goHenry Debit Card
lead the market for this product.
What Financial Tools Exist for Kids?
These prepaid debit cards for teens
can assist parents by providing useful parental controls over how and where kids spend their money. They provide financial literacy
for children by teaching them the skills they need to make good financial decisions from an early age onwards.
- Greenlight Debit Card is a prepaid debit card that can be used at any merchant that accepts Mastercard without incurring overdraft or other bank account charges for withdrawing too much money from an account. The service also offers granular controls over where kids can spend money at specific merchants. If a parent doesn't want a child spending money anywhere but their pre-approved locations, Greenlight gives you this control. Further, this card allows kids to invest for the first time through a custodial account that allows them to invest in individual stocks and exchange-traded funds (ETFs). This allows kids to see how compound interest works from a very early age—something of great use considering they've got decades of life ahead of them and many returns able to be earned.
- goHenry Debit card is a prepaid debit card for kids that offers similar features as Greenlight, though with less granular controls. For starters, it includes features such as parental controls and alerts over how much money is being spent by your children. However, parents have less control over where their kids can and can't spend money, only allowing you to limit whether they can spend money online or off, withdraw money at ATMs and blocking certain merchants labeled as "over 18". These cards are also ideal if you want your child's spending limited so they can't spend more than what's available in their account while still receiving real-time notifications about where the money is being spent or withdrawn.
Both cards allow you to lock/unlock the card from a mobile app, establish savings plans and goals, manage chores and allowance, customize cards and teach your kids the importance of financial responsibility.
To see further how goHenry vs. Greenlight
compares, consider reading more.
Good money habits to teach your kids
At the end of the day, parents want to teach and demonstrate good money habits to their children.
- Teach financial literacy:
Parents should teach their children financial literacy so that they can learn the skills necessary to make good financial decisions early in life. This includes teaching kids what an investment is, how compound interest works and other basics of finance like budgeting, saving money and understanding credit cards.
- Make them save some percentage every month:
A good financial habit is to encourage kids from a young age to save some percentage of their weekly or monthly allowance. This can be done with an automatic saving program and should also include teaching them how compound interest works so they realize the power of starting early on in life.
- Start helping them make financial decisions:
Parents are key role models in teaching financial responsibility, so it's important for them to start helping their children make financial decisions from an early age. This includes talking about the importance of a budget and what good financial habits look like.
- Give them responsibilities:
This is where most parents have trouble because they're not sure how much responsibility should be given at such a young age. Ultimately, it's up to the parents when financial responsibilities are handed off to their children but some good starting points include teaching them how credit cards work for adults or letting them buy small things with a debit card that can be tracked on debit cards like Greenlight and goHenry.