How and When to Teach Your Kids About Money
Whether we like it or not, we live in a world where money rules a lot of what we do. As parents, teaching and preparing our kids for this world of dollars and cents should be one of our goals. It’s our responsibility to give our kids the resources they need to be successful in life, and that usually includes a thorough knowledge and understanding of finances.
But when do you start this education and what does it look like? Is a basic economic class in high school sufficient? Can a five-year-old really absorb the concept of saving versus spending? Here, we break down some ways you can teach your kids about money as well as age-appropriate lessons.
Preschool. Before starting school, a young child will most likely not understand the concept of money at all, and that each coin and bill have different values. However, little ones can be prepped for school and get their first lesson in money at this young age. This is a time where familiarizing them with each coin and bill, along with their names, can be helpful.
Kids also love to play store, so this is a great opportunity to begin familiarizing them with the concept of differing valuations. While a teddy bear “for sale” may cost five cents, a trip to the ice cream parlor costs twenty-five cents, and so on. Keep it simple and make it fun at this young age.
Elementary. This is a great time to dig deeper into money concepts since your kids will be learning about it at school as well. During these years, it’s a good idea to take them shopping with you and explain the process during checkout. Instead of swiping the card, show them the actual dollars that go behind purchases. Explain how much something costs, why you selected the bills you did, and the change you receive. After a few times, let your little one handle the cash. Give them an opportunity to decide which bill or bills would appropriately cover the expense.
This is also a good time to switch from playing store at home to actually letting them make purchasing decisions in a real store. Give them a set amount and instruct them to make their best purchasing decisions based on their wants. You’ll also have to explain sales taxes at this point, and that it needs to be factored into the purchase as well.
Middle school. If you are a home that practices weekly allowances, this is a great opportunity for kids to really get their feet wet in the world of money. Have open conversations with your kids, explaining the importance of saving, spending, and giving, the three main categories of any budget.
By now, your kids can grasp the concept that oftentimes their purchases cost more than they are given in allowance. Instead of covering the difference, explain the importance of saving for what you want or need. Teach them that by setting aside a chunk of their money every week, it eventually accumulates to cover the expense.
This age is also great for instilling a sense of generosity. For example, some parents set aside a certain percentage every month to be given to various charities. This is something you can pass down to your kids, but don’t be surprised if you experience some pushback. Don’t press the issue, but encourage an environment where your kids naturally want to give to others. They will probably eventually come around on their own.
High school. These years are the training wheels for real adulthood. It’s important to provide a structured environment where your teenager can feel safe to learn about money, yet know they still have your support and safety net.
Some parents choose to give their teenagers a debit card with a monthly allotment. Instead of strings attached, explain to your teenager that this is it; this money has to cover all of their monthly expenses so they should make wise decisions. There will be a learning curve and most likely a few months of mistakes. Instead of instantly bailing your kid out, you can make them work it off, learning the value of earning money from home before going out into the real world.
Teenagers should also begin to be trusted with the management of a bank account. Most kids have one set up in their infancy, but as your child ages, it’s imperative to hand over the reigns. This will help set them up for bigger, heftier account management someday.
You can also encourage your teen to find a job. Whether it’s just during summer vacation or light work while finishing their courses, jobs during high school can teach your kids the value of an earned dollar. There will also come a time where you can’t be their financial safety net any longer and they’ll have to come up with their own source of income. High school is a good age to start the transfer of this responsibility.
Finally, talk to your teen about the dangers of credit cards. So many young people go off to college, open a billion credit cards to cover frivolous purchases, and get in way over their heads quickly. For a full rundown on teaching your kids about credit cards, read this valuable article.
Money is important. It governs a lot of what we do and most of the decisions we make. If you want to help your kid out and set them up for success, use these tips to figure out how and when to teach your kids the value of a dollar.