Financial Goals for Kids: How to Set Them and Why It’s Important
It’s no secret that many teens love to buy cool things. Whether it’s the latest makeup products from Sephora, snacks at fast food joints, gaming stuff and more, there are so many things for kids to buy. Spending, of course, can be very good when it’s done responsibly or as an occasional splurge.
But if you want to reel in your teen’s spending habits, consider talking with them about some achievable financial goals for 2024 that will have them spending less, saving more and putting them on the right track to financial success as they grow.
Why should kids have financial goals?
Everyone should have financial goals, no matter their age or income.
When it comes to kids, having financial goals instills a sense of responsibility and empowers them to make informed and confident decisions about money, explained Jennifer Seitz, a mom of three teens, CFEI and director of Education at Greenlight, a financial app for kids and teens.
“Goals are also an excellent way to share your family’s values around money — be it the importance of saving for the future, being mindful of spending or giving back,” Seitz said. “Additionally, when your kids achieve their goals, whether it’s buying a video game or contributing to a charity, it boosts their financial confidence in making smart money decisions.”
Goals aren’t always just about saving up for one big cool gadget or trendy item. For kids, goals teach them life skills that will stick.
“Setting financial goals introduces kids to the basics of budgeting, the art of delayed gratification and the confidence-boosting power of achieving what they set out to do,” Seitz said. “Tangible goals like a purchase are exciting, of course, and they can encourage your kids to practice budgeting, earning, saving and eventually purchasing. But keep in mind that goals could also be tied to financial behaviors, like building a habit of saving, learning investing and carving out time to learn more about personal finance.”
Encouraging Kids to Reach their Financial Goals
Seitz shared these strategies to help parents foster their kids’ financial goals this year:
- Make money tangible: Especially for younger kids, begin by providing a tangible means of saving, such as a clear jar or piggy bank. It helps them to visualize the accumulation of funds and the departure of cash when they spend. When your kids have a clear understanding of what digital money means, you can embrace technology by using banking apps tailored for kids.
- A goal-based saving challenge: Challenge them to save a predetermined amount within a specified timeframe, with a designated reward upon successful completion. This method not only cultivates an “earn it before you spend it” discipline but also imparts valuable lessons about setting and achieving financial objectives.
- Encourage regular contributions: Establish a routine for contributing to their savings. Whether it’s a weekly allowance or money earned through chores, consistent contributions reinforce the habit of saving regularly. You can also introduce budgeting concepts, such as the 50/30/20 rule. Explain that 50% of the income can go to needs, 30% to wants, and 20% to savings. You can come up with a guideline that makes sense for your kids to set guardrails for their spending and a discipline for saving. For example, if they’re not paying for a lot of their needs, more of their money can go to saving!
- You’re their best teachers: Financial education at home starts with open conversations. Discussing age-appropriate money topics with them can remove the taboo and demystify financial matters. Involve your children in family discussions about budgeting. Simplify financial concepts to make them accessible and encourage their input. For example, as you file tax this year, talk with your teens about the responsibilities of filing taxes, the tax benefits of charity donations, and the best ways to use tax returns.
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