How to teach kids of all ages money skills this Financial Literacy Month

A month of money smarts for kids of every age

As parents, we’re so busy making sure our kids are fed, clothed, and safe that teaching them about money often falls by the wayside. Don’t let it slide. One day, your kids will leave the nest, and you’ll want them to take on the world as money-savvy adults. To celebrate Financial Literacy Month, here are some simple ways to help get them there, no matter their age.

Ages 3­–5

  • This may seem too young to teach your kids about money, but it’s actually a great time to establish familiarity with basic financial concepts. Turns out, by age 3, kids can already grasp exchange and value. And you should know that a survey out of University of Cambridge concluded that, by age 7, many money habits are set, which means it’s essential to start early.
  • Little kids also can understand wants versus needs. At the grocery store, point out different items on the shelves: “We need milk and vegetables; we want chocolate milk and veggie puffs.” And don’t give in to your child’s demands at the checkout line. A Duke University study found kids whose parents gave in were more likely to have credit problems down the line. Helping them learn to delay gratification is worth enduring a few tantrums.
  • Kids this age can often differentiate coins, so you can teach them how to sort them into various denominations, drop them into a piggy bank, and eventually count them.

Ages 6–10

  • Counting and sorting coins should continue, and you can add bills into the mix (yay, cash!). If you haven’t already done so, set up a savings account at a brick-and-mortar bank in your child’s name—with your child in tow.
  • It’s fine to give an allowance, but don’t tie it to household chores. One study out of University of Minnesota found that giving kids unpaid chores is actually a predictor of some key life milestones like graduating from school and even getting a first job. The reason: Kids who do unpaid household chores learn responsibility and benefit from the experience of being intrinsically motivated. On the contrary, paying for chores introduces an external motivation that can easily disappear.

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Ages 11–13

  • Explain to your kid what a credit card is, and that using a credit card is the same as taking out a loan. If you don’t pay it in full every month, you’ll be charged interest and owe more than you originally spent. For example, by paying only the minimums on a $1,000 credit card balance, it would take you more than six years and cost you nearly $600 in interest to get in the clear.
  • Don’t pay your kids for good grades. One survey that showed that 50% of parents give their kids money for As. Research out of Harvard shows that it doesn’t work—again because using an external motivation isn’t what will get them to work hard over time. It’s the internal motivation.
  • Be careful what your kids are doing online. Facebook is under scrutiny after documents revealed it collected more than $34 million from in-app purchases made by minors. Make sure your kid doesn’t have access to your credit card number, and if you do agree to buy them something online, make sure your card details are not saved.

Ages 14–18

  • Make sure to start conversations about college affordability around the end of eighth grade. Sit down with your teen to make sure you’re on the same page. Will student loans be necessary? Do you understand the basics of financial aid? Make sure your kid knows you are saving for college: Kids whose parents do so are more likely to go, regardless of how much money they have actually saved.
  • Kids this age may begin to earn money from part-time jobs. That first “real” job may lead to more expensive wants, like the latest video game console or even a first car. And there are things to save for down the road, too, like college or a gap year As a result, becoming skilled at socking money away is crucial. Have your kid put away some of his earnings in a Roth IRA. Starting at age 20, if you save $1,000 a year and stop at age 30 (not that you should), you’ll have more than $200,000 by retirement.

Ages 18+

  • If your kid is about to head off to college, don’t co-sign for a credit card with her. You might remember getting a credit card in college; thanks to the 2009 CARD Act, the rules now say you need to be 21, have sufficient income, or co-sign with an adult to get a card. If you co-sign and your kid messes up, you’ll be responsible for the bill, and it’ll likely hurt both of your credit scores.
  • Encourage kids to work on campus. Studies show that having a part-time job under 20 hours per week during college can actually boost GPA.

I know, this can seem overwhelming all at once. So start to explore these conversations now. It’s worth the effort. The more your kids understand about money now, the better equipped they’ll be to handle money stresses later. For many more lessons, check out my book.

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