“Mommy, I want that!”
“I NEED to get these. EVERYBODY has them.”
“Can I borrow $20?”
As your child grows, the way of asking may change, but the question remains the same. Teaching kids about money and how to be financially responsible can be tricky for parents, but the financial lessons that you instill now can help to create financially responsible adults in the future.
The Consumer Financial Protection bureau website features a money as you grow tool which outlines age-appropriate financial lessons you can use to teach your children as they grow, from age 3 to age 18.
Preschool – The Basics
With preschoolers, ages 3-5, the most important basics you can cover with them include:
- Why we need money to buy things
- Why we earn money by doing jobs
- The differences between “needs” and “wants”
School-Age – Making Choices
School-age children, ages 6-10, will begin to learn the value of money in school and may be ready to spend their own money. For this age group, concentrate on:
- Making choices about your money
- Waiting and saving before you buy
- Protecting and saving your money with a savings accounts
The Centsables®, a fictional team of financial superheroes, can help make learning about these topics fun for kids.
Middle School – How Money Grows
As your child enters middle school, typically 11-13 year olds, you can get a little more technical with information on how we save, earn and spend money. Begin to share these concepts:
- The money in their savings account grows with interest
- The differences between buying with credit and buying with debit
- How credit cards work
- Being cautious about sharing personal information online
High School – Financial Responsibility
High school students, in the 14-18 year range, may have their first part-time job, earning their own money for the first time. They may also have their own expenses to cover, like gas, car insurance, or going out with friends. Focus your financial lessons on money management:
- Paying bills/writing a check
- Responsible use of credit cards
- Creating an emergency savings (along with guidance on what is an emergency and what is not)
- Sticking to a budget
Here are 4 tools you can use to raise financially smart kids into financially responsible adults:
- Allowance – An allowance reinforces the concept that you need to do work to earn money. Pick a few age-appropriate tasks (e.g. cleaning your room, setting the table, walking the dog, mowing the lawn) and set a weekly payment amount. Just like you receive your paycheck on a set day each week, pay your child’s allowance on the same day each week.
- Savings Goals – Help your child set a savings goal that they can work towards. This is something they will buy with the money they earn, whether it’s a video game, back to school clothes, or new sports equipment. Make sure the goal is set high enough so that your child understands the sacrifice of saving, but not too high that they get frustrated. They may be tempted to buy something else of lesser value along the way, but encourage them to stick with their original goal item.
- Savings Account – Open a savings account for your child where they can deposit their allowance savings or money they receive as gifts. Review the account statement with them each month, showing them how their balance grows with each deposit and how interest helps their money to grow. Also explain to them that if they start to save at a young age, they will grow their savings to a much larger sum than they would have if they started saving at an older age.
- Personal Budget – As your teenager starts a part-time job and wants more pocket money for hanging out with friends, help them create a personal budget. They should track the amount of income they earn each week, or each month, and factor in the expenses they need to pay (e.g. gas, clothes, movies, etc.). Encourage them to have a small amount of savings at the end of each budget period that they can add to their account.