
Ask HN: How do you teach kids the basic finance skills? - katsura
I have been wondering about this for a while. I grew up without any kind of financial education. To be honest, in my 20s, when I moved out of my parents&#x27; house, I didn&#x27;t even know what exactly is necessary to pay the bills. So, what resources would you suggest to teach kids basic finance skills? I&#x27;m thinking about things like paying taxes&#x2F;bills, a little bit about investing, how to not get screwed by student loans, and similar.
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cimmanom
Assuming you're now reasonably confident in your own financial literacy:

Talk to them. Give them chances to practice. Show them examples. Don't shelter
them from the fact that you spend/save/invest money or from how you
spend/save/invest.

Give them an allowance and a class of purchases that can be bought only with
the allowance (Toys? Sweets?) Expand the allowance and the class of purchases
as they get older and take responsibility for things like choosing their own
clothing. Help them develop a budget for saving and spending.

Reward them for saving. Pay interest on their savings. When they're old
enough, demonstrate the power of compound interest. Both working in their
favor and working against them. (My parents once demonstrated this using
cheerios instead of money.)

Have them sit with you as you pay your bills. Explain how they work, why you
pay them on time, etc.

Invest a few hundred or a few thousand dollars into some savings bonds and
index funds in their name. Let them monitor but not manage the money until
they reach adulthood. Explain the investments to them and why you chose those
particular ones.

If they're reasonably mature and reliable, get them a co-signed credit card at
some point in high school, to be used for emergencies and pre-approved classes
of purchases only. If you're concerned, ask the bank to put a low credit limit
on it.

Have the kid pay off (with money you provide, if you're not comfortable giving
them that much in allowance) or sit with you as you pay off the full bill
every month. Show them how much more they would have to pay if they paid it
late or paid only the minimum balance. This teaches them good habits; and
having their name on the card helps them establish a credit score so they can
get credit immediately upon reaching adulthood.

Show them the tax forms you send in for them every year. Explain what taxes
are for and the basics of things like deductions, pre-tax expenses, tax free
accounts, pre-tax and post-tax income, withholding, estimated taxes, and the
like. If you file their taxes yourself instead of getting third party help,
have them sit with you as you do it; later, have them do it themselves under
your supervision.

Talk to them about the financial decisions you have to make (Car loans?
Mortgages? Large purchases? Retirement savings?) and how you make them. Talk
to them about the good and bad decisions other people make - show them news
articles for examples.

Once the kid's savings reach a couple hundred dollars, get them a co-signed
bank account. Have them do the math to balance the checkbook, old fashioned as
that may be. When they reach adulthood, turn it over to them fully. Also help
them choose and sign up for a credit card of their very own.

Show them examples of why they should never use a financial instrument they
don't fully understand. Encourage them even as adults to turn to you if they
have trouble understanding a financial instrument or making a financial
decision.

