When I was a kid my parents never really sat me down and taught me about money, savings, debt, or anything related to financial management. Many of the money mistakes I made in college could have been avoided had I had a better foundation in regards to money and how to manage it. Now that I have kids of my own (and I am a bankruptcy attorney so I deal with this every day) I am determined to make sure that they are aware of the crippling effect of debt and how they can learn to control money and not the other way around.
It’s never too early – or too late – to start teaching your kids about money. Here are a few things you can do to help your kids build healthy money-related attitudes and habits:
Preschoolers & Early Elementary Kids (7 and Under)
While your five-year-old might not be ready to sit down and create his own budget, he is old enough to grasp some basic concepts, like saving, spending, and understanding the difference between “needs” and “wants.”
- Let them handle money. While young kids probably aren’t ready for more abstract concepts like credit cards and online banking, they may enjoy hands-on lessons using paper money and coins. Teaching them some basics – like the names and denominations of different coins or paper bills – can help pave the way for more complicated lessons later on.
- Invest in a piggybank. Once they have a basic idea of money, young kids will enjoy saving change in their own bank.
- Let them make some decisions. If your kids have savings, give them the opportunity to take money to the store and decide how they want to spend their money. Letting kids shop with their own money is also a great way to teach them about decision making and saving up for items they can’t afford. Your kids have probably already done this at the local Chucky Cheese (aka the 7th circle of Hell) when they have their tickets and are trying to figure out what they can buy so just relate the tickets to money.
Older Elementary Kids & Tweens (8–12)
The teen years may be the first time kids start to earn their own money. And establishing good habits now can pay dividends well into their future.
Experts recommended teaching kids how to manage their money before they start working. If a teen has a cash flow from a part-time job or an allowance, help them set up a budget that documents how much money is coming in and how much is designated for savings and spending. Teen need to know how to read a paycheck and what to expect with taxes once they start working.
Our increasingly cash-less society can make it hard for children to understand the true cost of their spending. Experts recommend parents take the time to walk teenagers through their financial transactions.
Parents sometimes feel guilty about not giving kids what their friends might have. That’s nothing to feel guilty about. By teaching them about the value of money and hard work and what things cost, they listen and absorb it, and it becomes part of who they are.
Teens & College-Bound Kids (13+)
Sending a kid out into the world without this knowledge is like giving a kid a car without driver’s ed.
While college students might roll their eyes at the idea of making a budget, knowing how to manage money is vital to the college experience. Whether your child is paying his or her own way, receiving your help, using financial aid, college is expensive and it will become pricier with poor spending practices. By passing on a few words of wisdom, you can give your college age child the tools he or she needs to start college on the right financial foot.
Millions of kids work part-time in high school. Before they take their first steps into the job market they need to understand the difference between gross pay and net pay.
Before they leave the nest, make sure your kids understand the three main types of savings: personal, emergency, and retirement. Give them an overview of each type of savings – what it’s for, when to contribute, and (most importantly) when to draw upon.
The critical factor is that, like all other financial matters, credit and money should be managed responsibly. Children who learn money management skills before leaving home can be in a better position to pay for their education, enjoy homeownership, and much more without overextending themselves.
You are never too young to learn important financial lessons. Teaching your children now about finance – from budgeting to investing – can help them become financially savvy, successful adults.