Five Money Lessons from COVID-19
Hello Guardian Savings parents!
We hope everyone is staying safe and healthy during this tense and disruptive time. If you are like us, you may have a lot more time at home and more family time than normal. Focusing on this as a positive, here are a few money-related activities and questions which you can do/ask your kids. While our app has many of these lessons built into the child’s savings account, it is also important to explicitly teach these lessons to kids and tie them to real world examples.
The Importance of an Emergency Fund
Point out to your kids that a lot of restaurants are shutting down. Ask your kids what they think the servers and cooks will do in order to pay their bills. Explain how even when you think nothing can go wrong, something always can. Because of emergencies, financial experts recommend that families should have 3-6 months of savings to pay for things such as housing and food. You might also acknowledge that in some occupations and circumstances, it’s really hard to save.
Help your child determine an appropriate emergency savings amount that they should have and help them segment some of their savings or come up with a plan to reach their target (we recommend a goal equal to one months worth of allowance/income). Within the Guardian Savings app, you can help your child create an emergency savings “Jar” for simple tracking. Setting your child up with their own emergency savings fund is good practice and lets them learn through imitation.
Helping those in Need
Some circumstances make it really hard for some people to have an adequate savings fund. Thankfully, our society has charitable organizations that are able to help some of those in need.
If making regular financial donations is part of your family’s financial learning agenda, now is another good time to explain how charities need steady funding to do their good work. Explain that without funding, charities such as ones that feed families in need may not be able to buy food to fulfill their mission.
Help your child choose a charity and determine a regular amount they can donate that is sustainable and appropriate given their current savings and income. Within the Guardian Savings app, you can help your child create a giving “Jar” so they can make regular contributions to charities.
Here are the NY Times recommendations on how you can financially help victims of the COVID-19 pandemic.
Needs vs Wants
Needs vs wants differentiation is a skill that takes a lot of time and practice for kids to master. With the coronavirus pandemic, governments are advising that you should not visit crowded places, like stores. You should only go if there are things that you really need. Ask your kids to make a list of all of their needs and all of their wants. Have them circle the top three things that they need right now.
Note how some people are tempted to buy “wants” by dipping into their emergency savings (a big no-no!).
Keep in mind that whenever your child makes a withdrawal in the Guardian Savings app, they are prompted to indicate whether the expense is for a need or a want. Remember to coach them to appropriately differentiate between the two – practice makes perfect!
The Value of a Dollar
Now is a great time to plan some spring cleaning! Figure out what you no longer want that you could resell at a garage sale or online when the pandemic is over.
After you identify items that you will sell, have your child write a catchy description to convince others to buy it, set a sale price, and determine a lowest acceptable price (should any seller try to bargain). Your child can lead the sale and may be able to get some practice negotiating.
Bonus tips for older kids
The Power of Diversification
Ask your child to write down which businesses they think are making more or less money because of the shutdown. (Are restaurants, hotels, grocery stores, etc making more or less money than usual?) Explain that when it comes to investing, not putting all your eggs in one basket can be key to a successful investing strategy. To advance further, you can show them the 6 month stock price of Kroger (a grocery store) and compare it to United (an airline).
The Importance of Insurance
COVID-19 shows us that catastrophes usually are completely out of our control.They can strike at any time, similar to a flood or fire. Ask your child what they think would need to be done if a house burned down in an accident.
Explain how everyone with insurance pays a little bit of money each month, even if nothing bad has happened. The insurance company collects and saves this money from everyone. When something bad happens to one person, the insurance company helps pay to replace the thing they lost. They can pay for it because they have collected and saved the money that everyone pays each month.