Teaching kids about money! BONUS: 5 awesome resources for you and your kids!
Dear No More Credit Cards,
I want to help my children learn about money. How should I go about doing that and what is appropriate age to begin?
No Spoiled Kids in THIS House!
Dear No Spoiled Kids,
Congratulations on your desire to raise fiscally responsible children. Managing money is an important life skill and you will find opportunities to teach your children about money from an early age. Since we have been in business, Golden Financial Services have helped numerous Americans get out of debt. When clients come to us, many of them do not know how they got in that position or how to fix it. It is important to teach budgeting and money management to our children so they can practice responsible spending and saving before they get themselves in over their head. The earlier you start talking to them about managing finances the more likely they are to make good choices as a teen, and beyond when they are no longer interested in your input.
For children of any age, you should make finance a part of their daily lives. Talk about being in control of your own money and show them how to save for purchases, such as toys and books. Include them in the bill paying process, show them where the family money goes, how much things cost, and that electricity is not free.
Shortly after my children found out that I pay every time they turn a light on, they also learned a lot about wasting money when I charged them a dime for leaving it on after they left a room.
Teaching children to budget is a valuable lesson in goal and priority setting. When they figure out how many mowed lawns it takes to buy that action figure, they may be more apt to save up for something else they could get more enjoyment out of. It is also important to educate children to save for the long term, like for a car when they are 16, and not just short term purchases. In addition, you may want to teach your children about philanthropy, like tithing at church and donating to causes that your family believes in.
Giving a child an allowance can help them learn about earning money. Assigning a dollar amount to specific chores rather than giving a flat rate allowance is helpful. In our home, my children did not get an allowance for basic chores of cleaning their room or bathroom. We thought that self-care activities and cleaning up after oneself were their contribution to the family. However, there were chores that we assigned a dollar value to, such as feeding the pets, cleaning cages, doing dishes, etc. In addition we would have bonus chores. Those were usually the ones no wanted to do like cleaning pet waste from the back yard or picking weeds. We would assign a higher dollar amount to those as an incentive.
Teaching kids about money: Preschoolers
Long before children start kindergarten they are aware of money. They see their parents put a card into a machine, push a few buttons and out comes money. They understand that Daddy and Mommy go off to work every day “to make money.” During the ages of 3-5 is a good time to help them learn to identify coins and paper money.
They can also start understanding the concept of needs over wants.
You can also introduce the concept of delayed gratification helping them learn to wait before getting something that they really want. You don’t know how many toys I got out of buying because by the time our “cooling off period” was over, my son forgot all about it. Chores at this age can include helping pick up toys, fold blankies, and feed pets.
Teaching kids about money: Elementary and Middle School
Between the ages of 6-13 years, is a great time to teach your kids about the benefits of a saving account and not giving out personal information, especially online. In addition, children of this age can learn to compare prices at the store to get the best deal for their money, as well as how to make decisions as to what to spend their money on. An introduction to using credit cards, what interest means, and how much it really costs to make a purchase before they can afford it. Teaching children financial responsibility at this age is helpful to prepare them for a time when they are making money, perhaps from their first job and have financial obligations.
Teaching kids about money: High School
Those teen years sneak up on us as the years fly by and during high school is the most important time to continue teaching your children financial literacy. At this point they probably want certain clothes, maybe a car, they might be getting their first job, comparing colleges, and deciding whether to try to live on their own or with a roommate after graduation. They will soon find out the importance of a high credit score and have to decide whether they should apply for student loans or not. There are so many opportunities to influence their financial future here and keep them from ever needing debt settlement services.
Left to their own devices, they may make mistakes that could be avoided.
Teens can learn how to make a budget and how to set long term savings goals. They should be allowed to give input, setting their own priorities; instead of making a spending plan for them, do it together. For example, most teens want a car, so show them how to set up a monthly savings plan so they can get one when they are of age.
This is a valuable time to teach delayed gratification because when they are on their own, reality is a much harder teacher. Perhaps you supply a clothing budget and let them live with their decisions for that school season. Another idea is to reward them for saving by matching their savings on higher ticket items. They should also learn how to manage a checkbook and the consequences of an overdraft. Teaching your kids about money throughout the years will help them manage money better in the future, and set them up for success!
BONUS: 5 Awesome Resources
Money As You Grow provides a great free infographic on 20 things kids need to know to live financially smart lives.
Use the Credit Card Calculator tool to help your teen learn the true cost of acquiring credit card debt. For example you could show him that if they use a credit card to make a purchase of $500 at a rate of 12% interest, it would take him 11 months, at $50 per month to pay off the purchase. Then they can decide if it is wiser to delay the purchase until he can save the $500.
Tykoon is the premier financial education tool for kids and their parents, empowering kids to develop stronger financial values with real money and real-life experiences – all under the safe and watchful eye of their parents. Tykoon enables kids to make smarter decisions using chore charts, savings goals, charity donations, and a controlled shopping experience. Parents can customize their kids’ platform experience according to their individual family’s financial values and the virtual environment is safe, secure and private.
Junior Achievement educates students about work, entrepreneurship and financial literacy. Check out Biztown where your younger child can learn about business principles, careers, banking, even free enterprise in a hands-on environment!
ThreeJars makes money management fun and easy for 5 to 13 year old kids and parents. Kids learn to manage “money” through saving, spending, and charitable giving jars – with guidance from Mom and Dad.
What are some of the ways that you are teaching your children about money? I would love to hear your ideas!