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!