Financial Literacy: Saving 101 for Kids

Happy Financial Literacy Month from Leading Edge Credit Union! Looking back at my financial habits as a child and teen, there are definitely some things I would want to change; certain advice I wish I would’ve taken more seriously. I always laughed when people said, “Start saving now so that you can afford to grow old!” because I always thought you just get richer as you get older. In some situations, that is true. However, it isn’t always the case. The older you are, the more expensive things tend to become.

Within this blog, we’re going to cover a brief overview of habits and skills that kids can develop to become more financially literate. Developing those habits and skills at a younger age allows for greater financial success over time. Whether you’re a parent, grandparent, or a “young one” yourself, below are some tips for how youth can get started.

What you’ll learn:

• Important Vocabulary to Know
• Budgeting Tips
• Creating an Emergency Fund

Important Vocabulary to Know

In the world of finance, there are certain words that you will hear a lot when you first get started. Some of those include:

• Saving – Putting aside some of the money you get, instead of spending it all right away.
• Spending – When you use your money to buy things you need or want, like food, clothes, or even a fun activity.
• Interest – Interest is the extra money you either earn or have to pay when you lend or borrow money.
• Compound Interest – Compound interest is when you earn interest on the money you’ve saved and on the interest that money has already earned. So, instead of just earning interest on your original amount, you also earn interest on the interest itself.

Budgeting Tips

1. Set a saving goal: One of the easiest ways to start budgeting is to have a specific goal in mind. For example, you want to buy a new video game or book that costs $30. You could set a goal that you are going to save your money to buy that new video game or book in the next month or two.
2.  50/30/20 Rule: One of the most common ways to begin setting up a budget is the 50/30/20 rule. This process looks at taking your total income and splitting it into 50% going toward your needs, 30% toward your wants, and the remaining 20% toward savings.  

Let’s give you an example: 

3. Use a savings jar/piggy bank: Having a piggy bank or a jar helps you see how much money you have. You could put all of your money and change into it, and once it’s full, you can decide how you want to split it up.
4. Look for ways to earn extra money: This could be as simple as asking your family if you can earn an allowance for doing helpful things around the house. Another way is to look for a bank account that has a higher interest rate so your money grows while in a safe place.

Did you know that at LECU, our Young Bucks youth accounts come with a higher interest rate and your own piggy bank along with other free goodies? You can learn more about those here.

Creating An Emergency Fund (College Fund)

The whole point of creating an emergency gund is to have extra money put away for unexpected situations like your car breaking down and needing repairs, or needing to pay to see a doctor. It is recommended that you have at least 3-6 months’ worth of living expenses saved up. At a young age, most of the time you aren’t typically thinking about emergencies so how about we call this the college fund for now. Saving for big expenses like college is something you can never start too early. Every little bit that is put away adds up – especially if you put it away in an account that gives you interest. Accounts like high-yield savings accounts help your money work for you by earning interest on your original balance.