One way to quickly engage your kids with the whole finance process is by opening a checking account through one of the major banks that offers online banking. The account is actually a subaccount of the parent which enables monies to be transferred easily or automatically. The account comes with a debit card which is considered to be a safer way to protect their money and control expenses. The account can also be set up with a savings plan. Here’s how a checking account arrangement can work towards advancing a kid’s sense of responsibility:
- Agree on a weekly amount to be deposited to the account based on allowance, school performance, or whatever criteria are appropriate.
- Agree on a weekly spending budget and, specifically, how the money can be spent. If they spend less than their budget they have a choice of rolling the excess cash into the next week, or transferring to savings. As an incentive to save, offer to match their savings dollar for dollar (but they can’t touch their savings without your permission). You could set them up with an account at Mint.com so they can monitor their cash flow and their savings.
- Encourage them to set goals for their savings to purchase a big item or to fund a special event.
- Each quarter, transfer to your kids an additional financial responsibility, such as paying for their own school lunches from their account. Of course, you will need to add the necessary funds, but now your kid will be responsible for managing the expenditure. Next, it could be something like their school clothes whatever you think they are ready to handle.
- Each quarter, sit down with your kids to review their account, their savings, and their budgeting performance. You can reward good finance performance with a quarterly bonus.