Summertime, and school is out.
Or is it?
While social studies and Spanish may be shelved for a few months, the summer offers a terrific opportunity to teach your children some valuable financial smarts as they bring some income from a seasonal job.
“Summer is a great opportunity to teach children about money,” said Kari Luckett, content director for CompareCards. “Children have shown that they learn to handle their money either the same way as their parents, or they learn from their parents' mistakes and handle it in a better way.”
If you fall into the latter category, maybe you can learn something as well. Summer money school is now in session.
Summer job smarts
For many youngsters, warm weather is synonymous with a summer job, whether it’s a high-schooler doing routine chores around the house or a college student busing tables for some spending money for next semester.
Making any sort of summer income — particularly in an economy still struggling to find its feet — warrants praise, but a summer job can mean much more than a simple paycheck to your children.
Parents should encourage their children to identify specific financial goals.
“Help them establish goals for the income they will be receiving,” said Katie Ross, education and development manager for American Consumer Credit Counseling. “Get them to ask: ‘What do I really want to accomplish with my money? Will I have extra money at the end or not enough? And, are these smart goals?’”
From there, suggest putting together a summer budget, including income tracking, savings goals, spending and other elements. As Ross noted, being aware of the ebb and flow of income and spending encourages living within your means.
“Encourage them to document their spending on paper so that they can visualize their goals and see how money comes in and out,” she said. “These are positive and responsible financial habits that will stay with them for years to come.”
A comprehensive budget can also track the overall number of hours your child works. That, said Atlanta financial adviser Whitney Lee, can establish the relationship between what something costs and the effort that goes into earning the necessary money.
“Instead of saying ‘That costs $20,’ help them understand what that actually means,” said Lee. “Tell them if you make $7 per hour, it’s going to cost you about three hours of time and work to purchase that one item. Is it really worth that to you at that point? This reinforces the ideas of want versus need, and they begin to understand what an opportunity cost actually is.”
The basics of savings
Who can forget the joy of earning those first paychecks and the rush of freedom to promptly spend it. Learning how to save some of that income can offer more long-term benefits than the most immediate of gratification.
One hurdle is identifying an effective motivation to save. Try pointing out the value of having money at hand in an emergency — a form of financial independence that frees teens from having to beg their parents for money.
“Depending on your child's age, that could be anything from a flat tire to a broken cellphone,” said Natasha Campbell of Lifestyle Success Unlimited, a financial education company. “That creates a responsible adult.”
Move the idea of saving beyond the personal benefit by encourage your children to set aside money for charitable giving to their house of worship or a social cause they support.
Saving can also be framed as a family activity by having the children kick in their own money for a vacation or recreational equipment the whole family enjoys.
Whatever the savings goals are, write them down, says national consumer finance expert Andrew Housser. “This will guide the budgeting process, making it more about achieving goals than limiting expenses.”
Summer money smarts don’t have to be limited to prudent spending and saving. If your youngster has expressed an interest in learning about investing, the relative downtime of summer can provide the ideal opportunity to begin to understand investing basics.
There’s no shortage of websites offering comprehensive information about investing, such as Morningstar and Yahoo! Finance. Both offer a wealth of how-to guidance, from understanding how markets work to the mechanics behind selecting a successful investment.
Options are also available to put that knowledge into practice, without risking real money. Google Play’s “Stock Market Simulator” is a free app simulates buying and selling in the stock market without having any real financial skin in the exercise.
“It is a great way to teach kids the real lessons of stock market investing,” said Phil Ash, CEO of Baton Investing, a stock investing service. “It’s one thing to be told how much money you can make, it’s another to actually make that money, even if said money is fake. There’s no better teacher than experience, and the stock market experience is a great teacher of business principles, finance, mathematics and even patience.”
Power of example
Helping your children learn how to handle money intelligently can be a rewarding summertime pursuit. But, even if your schedule doesn’t permit hands-on guidance, don’t overlook the value of a positive example. On one level, that means a constructive attitude, one that avoids finger-pointing if financial mistakes happen.
Additionally, be sure to set a positive example through action. A parent who preaches financial discipline is one thing — a parent who brings a brown bag to work most every day to save on the cost of lunch is both instructive and motivating.
“Your kids are constantly watching and learning from you, so set the best example you can. If you are only paying with credit cards and disregarding a budget or responsible spending, they will pay attention to that and learn those ways as well,” said Lee. “They'll also pick up on arguments you and your spouse may have about money, and that sets a negative impression for the future and how they will view money.”