One of the top questions we receive from parents is, “How can I teach my child about money?” As a mother of two, this question ignites my passion for instilling positive money habits in the next generation.
Americans list money as their number one stressor in life. Our children are sponges for our words and thoughts. We have the privilege of shaping our children’s money beliefs and habits that will last them a lifetime. Understanding age-appropriate money topics is important, so let’s start with our youngest learners.
Kids 5 and under
1. Talk to your kids about how money is used to support everyday activities. Start with frequent activities like using money to pay for groceries, fuel or restaurants. Kids will quickly understand there is a cost to items your family consumes.
2. Get a piggy bank or clear jar. Young kids may not understand the exact value of money, but they will understand the concept of accumulation as the piggy bank fills. This will be the introduction to the value of saving over time.
3. Let them pay. Start small with a dollar store trip and give them $5 or $10. Allow them to pick items, let them see the total due and use the bills to pay.
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Kids 6-11
1. Give them chore money. Research shows a characteristic of children who launch well into adult life know how to earn their own money. Identify age-appropriate chores and compensate your child when the chores are complete.
2. Introduce spending, saving and giving. With their chore money, talk with them about these three concepts. Choose an appropriate saving and giving amount per your family’s values. Encourage your child to give to an organization they choose.
3. Allow them to make decisions. Let them spend their spending money as they choose but explain options. Help them understand a LEGO set may be more money than they currently possess. Remind them money can buy experiences, such as a ticket to the zoo, not just tangible items.
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Kids 12-18
1. Introduce them to investing. Kids understand brands at a young age. Allow your child to pick a company they like and help them purchase an investment. Investments can be done through a custodial brokerage account such as an UTMA or fintech apps such as Greenlight.
2. Talk to them about taxes. When your child gets their first part-time job, they need to know part of their income will go to Uncle Sam. Help them understand their hourly wage will not be fully reflected in what they take home each payday.
3. Help them build credit. Add them as an authorized user on your credit card. Many companies allow this once a child is 16, but check with your card provider for age guidelines.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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