It is never too early to start teaching kids about money. Begin teaching basic principles of money as soon as children can understand that money is needed to buy the things they enjoy. Here are some ideas to help you.
Four—Five Year Olds
At this age, children should be able to distinguish between the value of coins. For example, they should know that a dime is worth more than a nickel, even though it is smaller. A traditional piggy bank can be used to teach saving skills. It is best if you use a clear container so children can see the money grow. Once a child is accustomed to saving, you should add a few pennies for every quarter saved, to introduce the concept of interest. Also, selecting toys that reinforce the savings concept is helpful.
Six—Eight Year Olds
At this age, children are old enough to receive an allowance. This is one of the best ways to give kids hands-on money management experience. The children should be paid on the same day of every week. They should be taught to divide their allowance into three categories: spending, savings for short-term goals, and long-term savings. These simple techniques help teach kids how to budget their money.
Children of this age also need to fully understand the differences between needs and wants. One way to do this is to have your child select items they like in a catalog or magazine. Talk with your child about the selected items, and have them distinguish if they are needs or wants.
Games such as Monopoly can be introduced at this age and can bring together family members for fun and a lesson in personal finance.
Nine—Twelve Year Olds
This is a good age for your child to open a savings account and learn the importance of regular deposits. Encourage the budgeting principle of “living within your means.” If the child expends all funds before the next “payday,” refrain from giving an advance. At this time, an in-depth discussion on how money earns interest is needed.
This is also a good age to introduce basic stock market principles. Have your child pick a few stocks that are of interest to them and follow them daily in the newspaper.
Children need to be aware that banks do not hold their “personal money” on a shelf until they come back to claim it. Peer pressure will start to emerge at this age. Children will have to learn that they might not have everything that every other family has. Kids will usually accept differences among families if they understand their own family values.
Teens
As kids enter their teenage years, it is important to build on their basic knowledge about money. Teenagers need to experience the aspects of a checking account, including writing checks, depositing/withdrawing money, using an ATM, and balancing a checkbook.
They also need to understand the use and misuse of credit cards and how important it is to maintain good credit.
Encourage teenagers to save at least half of their paycheck toward college or expensive school functions, such as the prom or an out-of-town sporting event.
Teenagers need to understand the cost of driving. As their earnings grow, they can pay a minimal part of the insurance, as well as pay for the gas they use.
Finally, peer pressure is at its highest among teenagers. Teach them to save for things they really want and realize that they can cope without other items. Provide them with a clothing allowance, and urge them to shop during sales. This way they can stay in style, even on a limited budget.
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