Teaching Kids About Money – Progression
Kids learn at different ages and different stages. With that being said, one important lesson every parent should teach is the power to be in control of money. According to CNBC.com eight out of ten people are in debt in the United States alone. Moreover, wouldn’t it be amazing if your kiddo was one of the two out of ten that are not in debt?
“Mighty Oaks from little acorns grow.” anonymous proverb
If you teach your child basic money lessons through-out all stages of development, he or she will then be able to handle finances as an adult. Therefore, starting early is the key! Plant the seed and your child’s money IQ will grow. You can begin a solid money foundation with your child. This will be in your best interest because they will not ask you to borrow money!
How early is too early? Children can understand the concept of money at a very young age. My two-year-old knows that we have to pay for items when we go to the store and he helps me hand our groceries to the cashier upon checkout. Nonetheless, I was just telling my four-year-old son how much money I have in my retirement accounts and he asked me if I had interest and investors. Kids are little sponges and they soak up what they hear mommy and daddy talking about. I’m not saying my son really understands what investing is, but he will one day. Start those conversations and be open about money with your kids.
As you continue reading, this post will give you ideas on how to begin teaching your child about money. You will find age-based examples to help guide you in your money-teaching quest. Furthermore, I am a former teacher and if there is one thing I love, it is teaching kids real-life skills.
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Money Lessons by Age
Piggy Bank that’s not so piggy
- Give your child a visible piggy bank like a glass mason jar. Then they will have a visual of money growing.
- Allow them to collect coins.
- Explain the names of the different coins.
Note: Coin names may be difficult to remember at this age. However, you are setting a foundation for later.
Idea: Use pennies to teach your child to count. Sit with them at the table and count out 12-15 pennies together.
Idea: Play store! Allow them to buy toy food from you with play money. Nonetheless, it doesn’t have to be fancy. You can make play money out of paper.
Ages 4-5 Money Lessons
- Early math skills will help your child be able to add and subtract his or her money as needed.
- You can have him/her count pennies.
- Continue to add money to the visual piggy bank.
- You can also teach him the names of each coin. By now they will start catching on and you can give them values. For example, Say, “This is a nickel. A nickel is worth five pennies.” However, this may be a hard concept at this age but again you are starting a foundation. Don’t worry if they don’t understand the coin values right away.
- Teach patience. Children can learn that they have to wait for things, including items they want to buy.
- Try simple addition and subtraction with objects
Idea: Target has felt money on sale in the $3 bin (date 1/31/2017). These bin items change from month to month, so buy now. You can also order felt money online or make your own.
Idea: Play supermarket. If your child has a toy cash register, that is great. If not, pretend with an old tissue or shoe box. Practice buying items from your child and allowing them to work the cash register as well. Pay them for the food.
AGES 6-7 Money Lessons
Chores for money and Save, Spend, Give
- Allow your child to do chores for a small amount of money. Explain to them that they can save for a toy or desired object but the rest of the money will go into savings and a small part will be donated.
- Show your child that items cost money. Explain to them the difference between a need and a want. Read up on needs and wants in my Say Goodbye to Impulse Buys post.
- Use the Save, Spend, Give method. Label a jar with each title. Teach your child the art of giving to others in need.
- Teach them that money is not handed to them and they will have to work hard to earn it. Example: My four-year-old son was able to buy presents at his school for Christmas. Instead of just giving him money, I had him do some easy chores with me and earn it. He loved helping out too!
- Lesson: Items don’t come for free. Hard work pays off and you are able to earn!
Idea – Allow your child to spend, save and donate. Open a bank account for your child. Let them put 50% of their money in the bank account and allow them to spend 40% on an item or activity of their choice. Donate the last 10% to a good charity or buy food for a local food pantry.
Tip: Set a good example! Your child is always watching you whether you realize it or not. If they constantly see you making impulse buys or pulling out the old plastic card for unneeded items, they will follow suit. On the contrary, if they see you spend, save and donate, they will be more budget savvy.
Ages 8-9 Money Lessons
- Give your child a chore chart.
- Let them sit with you and watch you pay your bills.
- Give them a weekly allowance. Let them save for the desired item while putting money in their savings account too.
- If you haven’t already, open up a savings account.
- Let them donate again. Teach your child the gift of giving and good karma will come their way.
- Show them a budget and explain how it works. Here is an example of a budget in my New Year, New Budgets – Budgets 2017 post.
Idea: Let your little entrepreneur earn money by raking the neighbors leaves or having a lemonade stand at your house (supervised, of course).
Idea: Hold a garage sale and allow your child to choose some old toys to sell and help work the cash register.
Money Lessons – Ages 10-12
- Talk to them about investing.
- Continue to contribute to their savings.
- Donate to a trusted charity. (I like Saint Jude’s Children’s Hospital).
- Show them how the stock market works. If you are fuzzy on this, read up on it. You really only need to be a few steps ahead of them. Furthermore, you are setting an example of being a lifelong learner.
- Have a talk with your child about using credit cards. Explain how they work and why your child should beware of them. Explain that they can be used to build good credit but it is also important to pay credit cards off on time.
Idea: Let them help you grocery shop and pay. Clip coupons together. (Check out Coupons.com)
Idea: Play “stock market”. Allow your child to “invest” some money by giving it to you with the condition that if you keep it for two months, they will make 10% back. (That’s a pretty good return.) Make sure you explain you can lose money in the stock market as well.
Idea: Take your child grocery shopping every two weeks. Allow them to add items on a portable calculator as they are placed in the cart. Teach them how to use coupons and find your total before you check out. You are teaching them to budget and how to shop without a surprising total at the end of the trip.
AGES 13-15 Money Lessons
Working and Earning
- Give them more in-depth information about the stock market, budgeting and saving.
- Show them an example of your household budget. (Don’t have one? Check out my New Year, New Budget post).
- Let them invest with you again. Keep this up from year to year, so they understand the concept.
- Your child may be ready for his or her first job. Around age 15, my sister worked at a local Subway; however, I used to babysit to make extra money. We were both able to earn money and save in different ways. Find something your child will enjoy.
- Talk to your child about college expenses. If you do not plan on funding his or her college education, a job would be the perfect way for them to start saving and avoid costly student loans.
- Show them how you have to pay taxes and walk them through your taxes with you. (I suggest Turbo Tax)
Idea: Set up a separate bank account to use for college savings.
Ages 16-18 Money Lessons
Investing and Planning for Adulthood
- Let them invest in safe mutual funds or dividend accounts.
- Continue working and saving for wanted items and college education.
- At this point, stop buying clothing and other wanted items unless it is something they really need. Hence, they are at the age where they can purchase items for themselves. An example would be buying their needed school clothing. Yet, anything extra or an expensive name brand will come out of their spending fund.
- Make sure they continue to add to their bank account and save for those college or trade school expenses.
- Continue showing them your budget and how much money you have coming in, how much you are saving and how much you are using to contribute to your retirement. Moreover, It is never too early to start thinking about retirement. – By the time your child is in their 60’s, there is no guarantee there will be social security to rely on. Imagine if they started a Roth at 18 and invested well. They would not have to worry about retirement in the least.
- Continue showing them how to do taxes.
- Talk to them about credit cards. Many credit card companies are waiting at colleges for young adults to sign up and start making them money.
Idea: Have your child sit with you and devise a real-life budget that he or she will use for college/trade school and living expenses after he or she graduates.
Teach Kids About Money at All Stages Conclusion:
Hopefully, by now, your child will have a good understanding of how money, budgeting and paying bills works. You are now ready to send them out into the world as a self-reliant, money savvy adult! Congrats to you for taking the time to teach your child a phenomenal life skill
Obviously, there are many lessons you could use to start teaching your child about money. These are just some basic guidelines to help. One of the best ways to teach children about money is to be a good role model and say goodbye to impulse buys.
Please leave me a comment. I would love to hear any of your ideas about children’s money lessons. Again, this is a guide and we could go into many more detailed posts about this subject, but teaching your child the fundamentals is so important for their place in the world!
Do you want your child to be one of the eight out of ten Americans in debt or a knowledgeable person that can invest and gain returns, budget, save and pay bills?
As always thanks for visiting my site. Furthermore, I hope this post helped give you some ideas to help work with your child’s money story. Take care – Sarah
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