Your kids have begged you countless times to buy them something. If you say “no,” and provide a reason, do they whine, have a meltdown or try to negotiate? Their lack of understanding is unquestionably irritating, but have you asked yourself if all the blame should reside with them, or perhaps you have a part to play?
Babies come into the world and everything revolves around them. During their first few years, kids are constantly cared for so it’s only logical that they would grow up thinking that they are the center of the universe. As they get older and are able to have some perspective, one of the many things we parents need to teach them about is money. After all, they won’t instinctively understand that money comes from somewhere (i.e. our hard work) and that it’s in limited supply.
You can start talking to them about money earlier than you think. The younger they are when you get started, the fewer whiney voices and tantrums you need to withstand. Here are my 2 cents.
Ages 2 to 3. Many kids at this age can learn to count and sort, so why not have some fun playing with coins instead of toys? You can start with sorting coins by color, and eventually, by size.
Important to note that change is germy, so I would suggest washing the coins with a disinfectant soap before handing them to your kids and designating thoe clean coins for play only. Coins are also small enough to be swallowed, so playing with coins should only be under your strict guidance.
Another fun thing to do is to allow your kids to put change in parking meters and watch the time increase on the screen (although in some areas, meters that take change are becoming a thing of the past). And while you probably hate those little toy vending machines, they can be instructive, too. Just remember to bring hand sanitizer!
Ages 4 to 6. If the coin-sorting game is working out, kids can graduate to adding and subtracting by size, and eventually value. Once school starts, their math teacher will be so impressed!
Also, it’s time to take them shopping with you. It may not be your first choice, but shopping presents an opportunity to demonstrate that things cost money, and at the same time, discuss the important differences between needs versus wants.
It’s good for them to see transactions so that they understand that the money is given in exchange for a good or service. And when it’s their money, it can really hit home. Try giving kids this age a “treat budget” when you head out for a day of shopping, suggests Bobbi Rebell, financial journalist, podcaster and author of the book How to Be a Financial Grownup. “Take the time in advance to explain that they can save it to use another time, divide it to use throughout the day or choose to spend it all at once,” she says. She also urges parents to stick to their guns and not give in if kids exceed their budget.
Ages 7 to 9. Whether you choose to give their kids an allowance free and clear or set the expectation that that allowance must be earned by doing chores, this is a good age to venture down that path. After all, they are members of the household and if they are able, they should pitch in.
Personally, I like the idea of giving kids the opportunity to work for their money. After all, they’re going to be doing just that when they leave home, so they might as well get a taste now. The most important element here is that kids should have their own money. It’s an important stepping-stone towards financial responsibility.
The money kids have is often a combination of financial gifts that they’ve received and money they’ve earned. Gavin Samms, founder of the Genesis Innovation Academy, an Atlanta charter school, says “Teach them values pertaining to how much their money goes to spending but also to savings and charity. Children should learn to appreciate watching their savings grow for some future goal as well as the joy of watching how their money can be used to help others.”
Rebell is a fan of using story time to impart money lessons. Reading about Paul Revere led her 9-year old to ask about taxes. A book about Steve Jobs prompted a discussion about business and entrepreneurship. She says, “When the talk is driven by questions your child is asking, it has a much stronger impact than if you approach a child out of the blue with a ‘money lesson.’”
Ages 10 to 12. Parents of kids this age know–tween tend to be a bit unreasonable. So, while it may not seem plausible, your kids are beginning to develop the ability to think hypothetically instead of just concretely, says Michelle Icard, author of Middle School Makeover: Improving The Way You and Your Child Experience The Middle School Years. If they’re out and about around town without an adult, try introducing a debit card. Some banks will offer a free debit card once kids are 13, but for kids under 13, cards like the Current card and the Greenlight card allow parents to load money onto a card for kids to spend. Allowance can be tied to this, if you so choose. This way, kids have their own card to use, but there is still a lot oversight because you will be notified of when and where the card is used. Make sure they are aware that you can see this, so if you raise a concern about a transaction, they aren’t blindsided.
But be warned. Icard says, “Don’t expect them to make good decisions about debit or credit cards where the money leaving their accounts doesn’t feel as concrete as cash leaving their hands. This takes a while to learn, and their brains are still highly impulsive.” Given that, take it slow and monitor all accounts together to ensure that your kids make smart choices.
Samms says that kids could also feasibly start earning their own money at this age. He suggests that they start with small jobs for neighbors or come up with a business idea of their own. “It is good for them to think like entrepreneurs, and reinforce the value of ‘earning’ money, as opposed to assuming someone will always give them money for existing,” he says.
Teens. Teenagers can, and should, start thinking about money like adults. They are old enough – and hopefully responsible enough – to have some kind of job, whether it’s scooping ice cream or working at a local shop to something more entrepreneurial, like babysitting, shoveling and lawn care. They should be paying for some things on their own, like things they want on top of what you’ve provided for them. Maybe it’s a pair of trendy sneakers, a pricey class trip or a limo to the prom. They should also be saving for bigger things, like things they want in the near future, like a class trip or a car, or for expenses down the road, like college.
Icard recommends helping your teens get comfortable discussing money with adults, a skill that will prove valuable down the road and will be helpful in negotiating rates now. “Give teens examples of how much you pay for services, what qualifications you would pay more for, what is of less or more value, and other examples of real-world money decisions in your family. Then coach kids on how to talk about money with assurance,” she says.
More complex topics, like compounding interest, should also be on the table. Given the limited attention span of teens, try a teaser like, “Want to hear about how to get more money without even doing anything?” says Brett Graff, aka the Home Economist and the author of Not Buying It: Stop Overspending and Start Raising Happier, Healthier, More Successful Kids. This should buy a couple of minutes to explain the value of earnings interest – that if they save their money in an interest-bearing account, it will grow over time. Teens should also start to learn about credit and you can do this by co-signing for a low-limit credit card for them. Paying down debt is another important lesson. A car note is a great way to get them ready for larger debts, like student loans.
Overall, no matter their age, making money matters a part of regular discussions with your kids will give them the financial awareness now to ensure solid financial literacy down the road. Keep it positive and engaging and you’re doing your part to set them up for success.
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This article was posted in its original form on USNews.com. It has since been updated.