Back to School Financial Checklist

For this post, we’ve come up with a few simple lessons for children of all ages that parents can teach, as well as specific action steps you can take as a parent to set them up on the path to financial success. While we’ve arranged them by grade level, feel free to shuffle them around or borrow ideas from other age groups if you feel you missed an important step or your child is ready for a more-advanced goal.

It’s back-to-school season, where parents are heading to stores with supply lists in hand, sorting through clothes to see what new items their children will need, and perhaps wondering how they will prepare both themselves and their children for the upcoming years of expenses ahead, from first cars to college. And while as parents we do so much to ready our children for many of life’s challenges, about a third of parents never talk to their children about money. It’s a good idea to periodically check in to see what we can do to help our children develop their financial literacy skills, one of the most important indicators of life-long success—and now is the perfect time to do so.
 
For this post, we’ve come up with a few simple lessons for children of all ages that parents can teach, as well as specific action steps you can take as a parent to set them up on the path to financial success. While we’ve arranged them by grade level, feel free to shuffle them around or borrow ideas from other age groups if you feel you missed an important step or your child is ready for a more-advanced goal.
 

Pre-K – Kindergarten

At this age, the concept of money is abstract, costs can be confusing, and the idea of planning for a financial future is too far off. But that doesn’t mean there aren’t things you can do for them, and simple lessons you can teach them about how money works.

• Start an allowance-for-chores system. Paying your children a small allowance each week is a great way to introduce them to the basic idea of what money is, and how people earn it. Scholastic recommends starting around age 5 and suggests 50 cents to $1 for every year of the child’s age. While some things should be expected (clean up your toys, make your bed, etc.), ask your child to contribute to household chores above and beyond in simple, regular ways. Consider having them help with one daily indoor chore (i.e. sweeping the kitchen floor) and one weekly seasonal outdoor chore (like raking the driveway), to introduce them to the idea of home upkeep in the process.
• Open a 529 Savings Plan. These plans allow you to grow a nest egg to use for education expenses, tax-free, while also taking advantage of state income tax deductions. Starting while your child is young is important, not only because you will have more time to make contributions, but also because the effect of compounding interest is much greater the longer it has to accumulate. Anyone can contribute to your child’s 529 account, but maximum yearly contributions are $16,000. For more about how 529 accounts work, check out our Overview of 529 Plans.  
• Create a will. If you haven’t created a will yet, it’s essential to do so ASAP. Wills allow you to dictate who you would like to be the guardian of your children, set aside money to be used for certain expenses (like education), and ensure that your assets will be managed and distributed exactly as you see fit, which is especially important if you should pass away before your children come of age. Wills should be created under the direction of a professional, and our estate planning services can help you plan for all of life’s scenarios.

 

Grades 1 – 3

In early elementary school, your children are already taught some financial basics, like how to identify the value of coins, add dollar amounts, and make change. They are ready for more advanced lessons on managing money, as well as some increased responsibilities around the home. In fact, according to Business Insider, “Many of the habits we carry into adulthood, particularly around money, are set by age 7[while] other habits, such as self-responsibility, are developed up until the age of 9.” In order to take advantage of this small window of time, here are some ways you can encourage the development of responsible financial behavior.

• Increase chore system responsibilities. If you stick to a pay-by-age allowance system, that means the amount of money they get each week will be increasing—and so should their responsibilities. Instead of simply helping you with a daily chore, shift the responsibility to them. Add an independent weekly chore or two, as well, like taking out the trash or wet-mopping the kitchen floor.
• Create a simple savings system. This could be as basic as a piggy bank or a jar, but any place that allows your child to see their money accumulate will do. Choose a percentage of their weekly allowance or gift money that they need to save. This amount will be up to you but aim for at least 10%. The most important thing is that you create a consistent savings system.
• Talk about what budgeting is. With an increased allowance and a requirement to save some of their money, you have already introduced your children to the idea that they have to earn their income and take action to manage the money they receive—in essence, budgeting. Taking some time to talk about what budgeting is, as well as the difference between needs and wants, is an important conversation to have at this age. The Balance recommends age eight as a good time to start, using a simple system: a sheet of paper divided into three columns, “goal, savings, and cost.”

 

Grades 4 – 6

As your kids begin nearing the upper ages for elementary school and start entering their adolescent years, you can expect two things: a more sophisticated understanding of money, and a desire for more of it. This is also a time in your child’s life when grades start to matter, and the relationship with their academic performance and future success starts to cement. Here’s how you can help them navigate this period.

• Consider paying your kids for good grades. According to We Are Teachers, “by fourth grade students should be starting to assess their own behavior.” This means that they are able to see what is working and what isn’t in terms of their learning habits, and make positive changes to improve their grades. As we point out in our post “Should You Pay Your Kids for Good Grades?”, giving them a financial incentive to do well in school can not only boost their performance, but can also give them more opportunities to learn how to manage their money.
• Open a children’s savings account. Their piggy bank might be overflowing at this point, especially if it gets a regular boost at the end of each marking period (see above). Around the age of nine is a great time to introduce your children to a more professional level of money management by setting up a savings account at the bank. Help them make regular trips to deposit their savings, and when their monthly statement arrives, be sure to take the time to review it with them and watch their account grow! 
• Work with them to set a small savings goal. Now that they have their own savings account, it might be a good time to help them set up a small savings goal. Around this age, their wants might get a little pricier, from new bikes to video games, while their weekly spending habits might be creeping up as well. Having a set goal to work for will help them understand how savings works, while rewarding them for their good habits!

 

Grades 7 – 8

The middle grades are times of major transitions in your child’s life. They also might start earning money outside of the home with small gigs from babysitting to mowing lawns, and their regular financial habits might be in need of an overhaul. Some things you can do to steer them into making smart choices during this time include:

• Making a more advanced budget. Maybe you’ve never sat down with your child to talk about budgeting, or maybe you haven’t in a long time. As adolescents begin to develop a stronger sense of self and autonomy, their spending habits may change, making it an important time to help them create a plan for how to wisely use their money. Introduce them to a budgeting app to help them track their spending and set goals on their phone, or use a simple worksheet to help them get started.
• Teaching them the value of a dollar. As Parents.com points out, “As children start to reach puberty, they should start preparing to make their own wise purchasing decisions.” They recommend taking your kid shopping to “point out a cheaply-made object and a higher quality alternative.” Talk about what it means to purchase sustainable products. And teach them your best bargain hunting tips, like comparing prices online and using coupons.
• Introducing them to investing. Since their own understanding of more abstract concepts begins to sharpen at this age, it’s a good time to explore the idea of investing. Consider purchasing them a savings bond as a gift for their 8th grade graduation or other milestone. As these funds mature, they will come in handy as your child prepares for college or life after high school. Investing a small amount of their savings in stocks is also a great way to study the concept of risk vs. reward. Check out Investopedia’s article, “How to Teach Your Child About Investing,” for more ideas.

 

Grades 9 – 10

During the first years of high school, they will have a lot on their plates. Keep financial lessons simple and useful during this time, while revisiting the most important lessons from previous years to make sure they keep following through with best financial practices. The following are a few additional steps to take with your new high school student:

• Open a checking account with a debit card. A savings account and some pocket money might have been good enough in middle school, but now more than ever they will need to have an account with a debit card. Not only will it make it easier to access at retailers and restaurants, it will also keep their growing balance of cash safer. As our post “Should I Give My Kid a Debit Card?” points out, “Americans increasingly favor making purchases using debit cards, and that includes American teens.” Our checking accounts at First National Bank and Trust come with access to online banking, digital wallets, as well as a Debit Mastercard® with Rewards.
• Set a long-term savings goal. There are a number of larger purchases that your child might desire during these years, from a nicer phone to their first car to a new video game console. Transitioning from shorter savings goals that can be accomplished in a few weeks or months to longer goals is a great way to help them start thinking about planning for the future. Consider matching their savings efforts—with specific strings attached. For instance, if saving for a car, Family Finance Favs suggests telling them “to get this 50% match, you can’t touch the money until you get your driver’s license.”
• Ask them to contribute to their expenses. Just as they can save for larger items, if they have income from an allowance or gig, ask them to chip in for regularly occurring expenses for things that they use, like the cost of their cell phone bill or car insurance. Keep in mind, however, that restricting use of their car or cell phone might become a point of contention if they are footing the bill themselves.

 

Grades 11 – 12

 

• Research college costs together. Work together to get a picture of how your combined college savings and expected financial aid will add up compared to current tuition costs, and make a game plan together for how to bridge the gap, including scholarship opportunities, loans, parental contributions, and part-time employment. Teach your child about the Federal Student Aid system, so they are prepared to use it when it’s time to apply. These steps will help your child make the decision about the right school for them—both academically and financially.
• Open a Roth IRA for your child. To commemorate the milestone of their first job, consider opening them a retirement account. A Roth IRA can also make a great high school graduation gift, or, perhaps, better yet, open the account in secret, and allow funds to accumulate, and bestow it to them when they graduate from college so that they can continue to contribute to it on their own when they set out in the real world.
• Purchase a CD. Instead, or in addition to an IRA, getting a 1-2 year CD right now that will come due when they are ready for college can be a great graduation gift that can help with future college expenses. On the other hand, your child could open their own account as a way to safeguard their savings between now and college, while earning interest in the process. CDs have lots of benefits, from higher yields than regular savings accounts to federal insurance (unlike stocks!) and can make a great vehicle for shorter investment goals.

 

College/Post High School

 

• Help them select an appropriate credit card. Once your child has a regular source of income and a firm financial footing in other aspects of their life, it may be time to take the plunge into the world of credit. Because of the risks, Credit.org suggests college students use credit cards only for emergencies, and a personal credit card through your bank can be the perfect tool for this. Alternatively, starting with a card with a lower limit is another way to build credit responsibly without the risk of getting into debt. Encourage them to pay off the full balance each month—if this becomes a struggle, simply have them stop using the card until it is paid off.
• Work together to make a sustainable budget. It’s probably time to revisit that budget again, especially if your child is living away from home and, at least in part, managing their own expenses. Teach them the 50/30/20 budget rule to balance their wants, needs, and savings, and discuss ways to help reduce their spending to stay on track.
• Encourage employment. If they are in college, this might be limited to part-time and summer, work study jobs, or paid internships, but it’s important that they have a habit of working for money, as well as establishing an employment record. As Daniel Douglas, education and employment researcher, explained to US News, “if you're working during college, you're gaining important work skills that will be valued by future employers." If your child isn’t in school, but still lives at home, require that they maintain some kind of employment and contribute to expenses. Alternatively, consider setting a savings goal for them to save up funds for their first apartment, offering to match whatever they save if they meet the goal on time.

 

First National Bank and Trust Can Help Check Items Off Your List

As fellow parents and members of our community family, we know what a huge and all-important task preparing your own children for the future can be. At First National Bank and Trust, we are here to help you every step of the way, no matter what time of the year. Our savings and checking accounts can offer your kids the basic tools they need to effectively manage their money as they grow older. And when you’re ready, we can work with you to create a personalized savings plan, from college savings accounts to retirement funds and everything in between.We're here to help you choose the right bank account for your kids, no matter what age. 
 
Explore our savings and checking products, visit us at any of our convenient locations in Southern Wisconsin and Northern Illinois, or reach out to our wealth management team to learn how we can help you and your child today!