Part of any proper financial education is banking…and with that banking with kids becomes very important.
Banking is the most important (and most basic) financial institution. Everyone will encounter the bank at some point in their lives, right? So it’s much better for your kids to be familiar with banking sooner than later.
With my previous blog posts being about allowances and savings accounts, it’s also right that we discuss banking.
Banking and What It Can Do For Kids
The best way to talk about banking with the kids is to make them understand how important banks are in safekeeping people’s money and lending money to people and companies who need it to grow.
You have to let the kids know what banks can do for them as children and individuals.
First, a bank is a place to keep and safeguard their money. It can’t get lost and you can get it back whenever you needed it.
Second, it’s there to help them prepare for the future by helping them safely increase their savings.
Third, it’s there to help them in case they need money when they are older.
It’s important to explain it in a simple manner first and then expand on these concepts as they grow older.
Why You Need Banks
Kids will most likely ask you why they need a bank account when they can simply save their money at home. So here are several reasons you can tell them, to explain to them the importance of banks.
Explain to them that banks will keep their money safe. They have personnel and systems designed to make sure that money is stored securely. In olden days money was kept in large safes (though today it is managed digitally). You can explain that it’s not advisable to keep big amounts of money at home. It’s dangerous and there’s a risk that it could be stolen.
2. Money Management
Explain that money that you have on hand is money that can be easily spent. Putting your money away in institutions like banks creates a barrier to deter you. Instead of getting the money from your wallet to spend it right away, you need to think twice before doing so. Wise spending is one of the most important aspects of managing money.
3. Interest and Investment
Explain that banks have the capacity to make your money grow while in their care. Banks lend money to other people or businesses and use the money you put in to do so. In turn, they pay “interest” to you because they used the money you deposited to lend to others. But you needn’t worry: you can get your savings back whenever you need them.
4. Loans and Credit
Explain that banks will allow you to borrow money them if you need it. But also explain that borrowing entails responsibilities, costs (negative interest) and very careful money management. Also, don’t forget to include to mention credit tools like credit cards and cheques. It will become very important tools when they grow older. (See our e-book A Smart Way To Spend Digital Money for more details on this. The same way you cannot touch digital money, you cannot touch this book. It is digital only.)
Tips On Introducing Banking To Your Kids
1. Make them open a savings account. As I mentioned in my previous post, a savings account will definitely help your kids jumpstart their financial journey.
2. Bring your kids to the bank. Whenever you do simple transactions like withdrawing or depositing, bring the kids. Make sure they’re also there when you open their savings account.
3. Make them count their own money. When doing transactions for their account, make your kids count their own money. Let them be the one to hand over the money to the teller as well.
Why Should Kids Learn About Banks Early?
It’s important for you to demystify banks to your kids early on, to reduce the barrier for them to access these institutions. With banking becoming more and more digital as well, it’s important that you introduce them to the brick and mortar concept of banks.
As I mentioned in my previous posts, younger children tend to think more concretely, and tangible, tactile experiences make learning easier. This means that bank visits will be very beneficial to them. Keep exposing them to the bank whenever you can so that it’s easier for them to practice on their own when they are older. After all, our goal is to make sure that they are independent and educated financially.
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I like what you said about helping your kids open a savings account to help them get into banking. My sister has been telling me about how she wants to make sure that her kids are financially responsible in the coming years. I’ll share this information with her so that she can look into her options for banks that can help her with this.
Definitely! Banks have a lot of kid-friendly bank accounts out there. I’m sure that you’ll be able to find one that will benefit your sister’s kids, especially in the long run! Do let me know about your decision-making process — what factors you looked into, what banks you considered, and ultimately, which bank you chose.
The blog is so interactive and Informative!