Teaching kids about money is one of the most important life lessons parents can teach to their children. The good news is, you don’t have to wait until they are getting their first job to start implementing good money habits–you can start when they are toddlers! There are money lessons to be learned at any age, and today we are going to break it down and see which lessons are appropriate in every age bracket.
Ages 2 to 4
Start to introduce your child to money by getting them familiar with coins and dollar bills. Show them all the different coins and tell them their value, and then make up simple games about matching the coins to their values, just to get them thinking about what it all means. You can even start to introduce simple chores and pay them in the coins you’ve been talking about so they begin to connect the work-money relationship.
Ages 5 to 10
As your child gets older, you can start introducing them into basic personal finance. As their allowance gets a little larger, teach them how to budget their money they earned by using the “spend, save, give” formula. Teach them the importance of having savings goals, how to give charitably and how to spend their money responsibly. Show kids at the older end of this age range how you budget your finances. You don’t have to go into all of the details but show them that you are practicing what you preach.
Now that your child has been earning an allowance for a while, it’s time to take them to open up a savings account in their name. This will make them feel “grown up,” and it will teach them how to handle accounts at financial institutions. Show them how to make their own deposits and withdrawals so they get familiar with how everything works. Since they have their own account now, it’s probably time to reiterate the importance of saving money and having money goals. Also, help your preteen/teen to look for new ways to earn money to work towards those goals. Can they feed someone’s pets, babysit or mow lawns to generate more income?
Ages 16 and up
It’s time for your kid to get a real job! Encourage them to seek time-appropriate employment opportunities in the real world to help them earn more money. Take them to open up a checking account and show them how to deposit their checks. When the get their first paycheck, go over the taxes and explain what they are and why they were taken out of their checks. All of these things are just setting your child up for the real world that is imminently looming ahead. Chances are your child wants to save for a car or for college at this age. Not only is this the time to revisit the idea of working towards savings goals, but it can be an opportunity to introduce them to the concept of matching funds. Instead of an employer matching their 401k fund, you can match their car or college fund. Set some parameters, and tell them if they reach a certai money in their savings account, you will match them on the amount. Then explain how some employers do this for their employees’ retirement funds.
No matter what age your kids are, there is always some money lesson that can be taught. The earlier you teach them, the more likely the lessons will stick in their minds and become habits when they are older. Set them up for success by starting early!
School teaches kids many things they need to know, but most schools really lack in common sense money lessons. Kids learn all sorts of math over the years, but rarely does it actually help them learn money principals that will set them up for a bright financial future. Today, we are going to list several lessons that are not taught in school and how you can teach them to your kids so they will be smart with money.
Lesson #1 – Self-Discipline
When it comes to money, self-discipline is the key to success. Schools today don’t teach the value of self-discipline in your finances. Kids need to know how to have enough discipline to create and stick to a budget, save money, and how to delay instant gratification. This is one of the most important lessons they can learn. If they don’t learn how to be self-disciplined at an early age, it will be extremely hard for them to learn that skill as an adult, and the lack of self-disciple can sneak into other areas of their life as well. As parents, you can teach them how to be self-disciplined by teaching them how to set money goals for the money they have. If they have a certain goal to attain, they will learn the importance of saving for that goal, which will in turn teach them delayed gratification. This will get them on the right track to learning how to be self-disciplined with money.
Lesson #2 – Where Money Comes From
We’ve all heard the parental joke, “Do you think money grows on trees?” but in reality, that brings up a valid point. Do your kids know where money comes from? Chances are they know what money is (and that they like it), but if they are young, they probably don’t understand how you get it. The lesson they need to learn is that money comes from hard work. Instilling a work ethic at an early age is not only good for the financial side of things, but it is important in all areas of life. As parents, you need to teach your kids that money isn’t just going to come in without any effort. A great way to get this lesson started is to give your kids age-appropriate chores and then pay them per job completed. Set up a chore chart, and equate every job with a certain amount of money. It’s simple, if the kid does the job, they get the money. This teaches them the value that income comes from work.
Lesson #3 – How to Say No to Debt
Debt is one of those topics that everyone has different opinions on, but one thing we probably all agree on is that too much debt is bad. Kids today grow up in a “give me” society. They want what they want, and there is always a loan or credit card that can give them what they want instantly. What is perhaps most tragic about this scenario is that kids aren’t being taught the consequences of saying “yes” to debt. It is up to parents to teach their kids about high interest rates on credit cards and what happens if you don’t pay your debt back. Another great lesson to teach them is that while you really should try to have the money to pay for everything up front, some debts like student loans and mortgages are not as bad if you have the money to make the payments. The way to teach them these things is to lead by example. Talk to them about debt, and show them the ways you stay out of debt or actively pay debt off. Let them see that this is an important topic to you and more than likely, it will become important to them too.
Lesson #4 – Give Freely When You Can
Giving back is a money lesson that usually isn’t taught in schools. As important as saving money is, it is also important for kids to learn to give charitably when possible. There are different ways to teach this lesson to your kids. First, you can show them how you are giving charitably by involving them in the process. You could sponsor a kid through an organization and keep their picture where everyone in the house can see it. When the kids look at it, take that opportunity to talk about all the ways your giving helps that particular person. Another way to get your kids involved is to let them give out of their own money. Whenever they receive money, show them how to put a little aside to give towards the family charity project or to your church if you attend one. Teaching them early that giving, even if all you can give is just a little amount, is important will radically impact the way they view money when they are older.
All of these lessons are extremely important to raising your child to be responsible with money. Yes, there are many more money lessons your kids will need to learn over the course of their life, but if you instill these four lessons at an early age, they will be set up to be financially smart in the future.
One of the most important lessons you can teach your kids is how to deal with money the right way. Many kids don’t get that lesson growing up, and when they become adults, it causes unnecessary hardship in their lives because they don’t know how to handle certain financial situations that may arise. A big part of those parental financial lessons should be about saving. Saving money is a hard to do if you don’t make it into a habit, so it’s important to get kids saving at as early an age as possible. Here are some fun ways to get your kids on board with saving.
The Power of the Piggy
One of the most basic forms of saving is simply the piggy bank. If your child is younger, start at this level. When they receive money for their birthday, or if you have them on an allowance, teach them to put some of it (if not all of it) into their bank. Teach them that they can’t just go into their piggy bank and get money out any time they want. This is a simple and very effective savings tool.
Divide and Conquer
When you give your kids their allowance each week, give it to them in one dollar bills. Have jars or envelopes with titles that represent their savings goals. If they have a specific item they are wanting, label a jar with that item. There could also be jars for “fun spending” and “giving”. When your kid gets their money, have them put a little into each jar. So if your child gets $5 per week, they have five bills and put one in each jar. Or they can put more into a jar if that goal is more important. This teaches kids to not only save money, but to work towards a goal and not fall into the habit of immediate gratification.
Open an Account
If your child is a little older, a good option might be to open them a savings account in their name. They can take their piggy bank stash that they have been so diligently contributing to and convert it to an actual bank account. This is not only teaching them how adults save money, it’s also teaching them the basics of banking.
Create a Timeline
Some kids get a kick out of knowing when things are going to happen. If your child is one of them, it may be beneficial to create a timeline of their savings goals. If they want a lego set that is $50 and they get $5 per week of allowance, chart out how many weeks it will take them to get to their desired $50. By knowing that it will take them 10 weeks to get to their goal and seeing that mapped out in front of them, it motivates them to keep saving because they can physically see the end result.
The Matching Game
A great way to teach your kids about how 401k’s work it by playing the matching game. Set some parameters for your child that if they do certain things, you will match their savings contributions. For example, you could say that if your child decides to put two dollars in their savings jar instead of their usual one, you will also put two dollars in their jar. If they choose to only put one then they forfeit the match. You can make the rules anything you want, but the point is to show them how employers match employees contributions to retirement. This technique also comes in handy when you have older kids who are trying to save for big items like cars or college.
Lead By Example
Perhaps one of the best ways to teach your kids about saving is to lead by example. Sometimes kids don’t always listen to what you say, but they watch what you do. While you don’t have to go into every single detail of your personal finances, it’s good to talk to your children about some aspects of them. Make sure they know that you have savings goals and that you regularly contribute to them. Tell them some of your goals and celebrate with them when you hit them. Give them your personal savings tips and techniques that help you along in your personal finance journey. Don’t just give them the highlights though. Tell them about some bumps you have had along the way so that they know that it’s not always a smooth journey to success. If you let them see that your are practicing what you preach there is no limit to your teaching influence on their finances.
Teaching kids about money isn’t always an easy task, but if you just install the basics of personal finance in them while they are young, you will be setting them up for success in the future.