When is the right time for you to be teaching kids money lessons? Well, according to many experts, it’s never too early. Money is a fact of life that should be talked about openly from early childhood. Learning good money habits as a child is as important as learning to brush your teeth and tie your shoes.
According to a poll by creditcards.com, one in four adults in the U.S. with children under 18 say they never received money training as a child, and only 40% say they are giving their young kids an allowance.
Forbes.com reports that children as young as three can learn the basic concepts of saving and spending, and according to a study by the University of Cambridge, their money habits are established by the age of seven.
This can sound a little bit overwhelming to any parent, but the truth is, although it’s never too early to learn about money, it’s also never too late. Even adults can use a refresher course on money smarts while we help our kids learn the value of each dollar and dime.
Instead of giving your child a ceramic piggy bank for saving money, where it’s hard to gauge what’s inside, use a clear jar or container. Let them see how adding in coins and bills adds up to exciting totals. Money counting provides valuable math lessons in addition and subtraction.
Play money and toy cash registers are fascinating to young children. (Make sure you don’t use small pieces for children under 3.) It’s easy to play “store” or “restaurant” and help them learn the value of items. Include a few items from your pantry, or a take-out menu, and let their imaginations thrive while they learn.
A simple but important personal finance lesson is making the connection between working with earning money. Even if you feel your child is too young to receive a weekly allowance, suggest chores they can do to earn some cash, such as helping you with yard work, feeding pets, putting away groceries, or drying dishes. If they don’t follow through with the job, don’t pay, but keep it positive for next time.
A second finance lesson that goes along with earning is understanding that you can only spend your money once. You may want to supplement their earnings for a special treat, but let them have the joy of using their hard-earned money to pay for what they want, and let them understand the reality that the money they spent is gone in trade for their treat.
By elementary school and middle school, kids may know a little about the cost of groceries or gas by watching you pay for them. Take time in the supermarket to compare prices, or let them know the current cost of a gallon of gas.
Now is the time to have discussions about what other expenses are a part of everyday life. Two easy examples that children relate to are the cost of the cable bill (or whatever they use for their entertainment) and the cost of a cellphone.
It’s a good idea for them to see you making bill payments. Instead of saying “money doesn’t grow on trees,” allow them to understand how many of life’s basic necessities cost money. Houses and apartments cost money. Heating and electricity cost money. Going to the dentist costs money. New clothes cost money. Paying off credit cards costs money. Once they get that basic message, you may see they show appreciation for what they have.
Give your child a weekly allowance to help them build money responsibility as early as the age of eight. Set ground rules and expectations. Agree on a set of weekly chores or responsibilities that are to be met prior to payment.
Having a steady allowance can help your child build a plan to save money for the things they desire. Discuss these plans to help them understand costs and timing. This is also an excellent time to discuss the difference between “needs” and “wants.”
Living within our means is essential for financial fitness, yet probably the most difficult rule to follow at any age. The pull of instant gratification is strong, but once money is gone, it must be restocked. So, help your child to understand the value of pausing to consider whether a purchase will have lasting value, or is just a temporary thrill.
Have your child establish his or her own savings account that they can use to save a portion of any earnings, cash gifts, or accumulated allowance. Most banks offer savings accounts that can earn interest to minors with no fee. Like watching that jar of money grow, let your child check their balance online to see their progress.
Take your child to the bank with you often. Let them get a feel for the difference between making a deposit or a withdrawal, and help them understand where those deposits go and where the withdrawals come from.
Giving cash is a great way to empower your teen to make financial decisions about what is important to them. It also gives your teen the opportunity to learn the cost and value of what they desire. With cash in hand, they can research the best prices on the most reliable products. You may be surprised that they opt to save some money rather than spend it all at once.
Have your teen maintain three separate banks or buckets. One bucket is for spending. One bucket is for saving. One bucket is for giving. Striking a healthy balance between the three buckets is a simple but important way to make budgeting a habit.
Spending money goes to necessities such as gas, or school lunches, along with weekly splurges like a movie and dinner out. Savings goes toward growing funds for important goals such as a car, college, or a dream trip.
Then, putting at least 10% of earnings aside for giving to a charity or a non-profit of their choice is an excellent way to begin a life-long habit. It gives teens time to think about causes that speak to their heart and shows how generosity can make a difference.
No doubt, teens are busy with studies and student activities. But when weekends, holiday breaks, or summer rolls around, it’s a great time to get off the couch and earn some extra cash.
If your teen gets a part-time job that provides a paycheck, this is an opportunity to talk to them about tax withholdings. In addition, having a part-time job can also help your teen experience the working world during a time when they are making decisions about what they want to do when they’re adults.
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