What to teach children about money at every age
Children are inherently interested in money.
Depending on their age they may not know what it is, but they know it’s important and affects us daily.
How old was your child when they handed you your wallet for the first time? My daughter was two. She didn’t know what the wallet did, but she knew it belonged to Dad and he needed it to leave the house.
I have found when working with my clients that creating positive interactions with money can help your kids create financial stability in adulthood.
The good news is that you can start teaching kids about money from a very early age.
If your children are older and you haven’t started or maybe you have created a negative connotation with money, it is never too late to start teaching valuable, positive money lessons. BUT Brown University research has shown that by age 9, we have set most of our money habits.
It is important to remember that money is a tool, it is not positive nor negative, it is our experiences that give a feeling to money.
You want to set your kids off on the right foot, financially, and helping them have a positive relationship with money is the first step.
The money lessons that are most effective will vary based on your kid’s age.
What to Teach Children About Money at Preschool Age
Before the age of four, you should introduce basic concepts about money.
This generally includes using words like money, spend, save, earn, goals, and work.
Small children learn by watching us. They see us exchange money for goods at a store, and use our credit card to pump gas. They quickly learn the purpose of money.
We all have a piggy bank, that is the quickest way to introduce saving to a child. But, as the child gets older, we should empty the piggy and move the money to a savings account.
Check out my blog post on 3 mistakes parents make when teaching their kids about money.
Use these words in simple sentences, such as “Dad likes to save money” while putting money into a piggy bank. The visual and noise of the coin going into the piggy bank will entertain and intrigue your child.
As your child reaches the 2-4 age group, you can establish activities, like counting the money going into the piggy bank or searching for loose change in between couch cushions. Be sure you are making money a positive aspect, not something negative.
What to Teach Children About Money at Elementary Age
Between the ages of 5 to 10, the concepts of money should become more defined.
Thanks to technology though, the opportunity for our children to view money as a finite object is getting lost.
When I was in school, I paid for my school lunch with cash. Lunch was $2, sometimes my mom would give me $5, so I could either spend it all on snacks and drinks or order the regular lunch and save the $3 for when we go to 7-11 before practice later on in the week.
That is a microcosm of important money lessons: I needed to budget, understand the cost of my purchases, delay gratification and save or spend it all in one shot.
Our kids don’t have that opportunity to learn this lesson.
Now when my 9 year old daughter buys lunch, she just gives her ID number and her account is debited. Little did she know that mom has access to this phantom money account and can see all the transactions, so the ice creams that she bought for two weeks straight were no longer her secret.
But you can’t blame her, she doesn’t realize she’s spending my money, she’s just giving a number to the lunch lady!
We need to work even harder now than ever before to purposefully implement money lessons and not just hand over our credit card or “add more money to the account.”
My 9 year old has a unique relationship with money, and I always use her as an example of what not to do. You can learn more about her money personality here.
You develop most of your money habits by age 9
If at age 9 we have developed most of our money habits, then what can we do in elementary school to make sure our 9 year old has a solid foundation? The money habits learned by 9 are also important life habits, such as self-control, delayed gratification and planning ahead.
For example, as your child gets older, their responsibilities around the house will increase, and they may even start getting an allowance. Read my blog post about allowance strategies here. An allowance is a great way to teach money lessons.
Take as many opportunities you can and treat them as a learning lesson. For example, if your child wants to buy a new toy, instead of just buying it for them, introduce saving for a purpose and buying the toy in cash. It teaches budgeting skills, delayed gratification, saving and then spending on what we saved for.
What if your 9 year old wants to buy a makeup set? If she is helping around the house or earning money by walking the neighbor’s dog, you can explain to her that you will need to walk the dog X times in order to afford your desired make up. Then leave it up to the child to determine if it is worth it. You may think the set is expensive or there’s better things she can do with her money, but by giving her the independence to decide, she can weigh the pros and cons and make her own money decision.
Be supportive and don’t automatically dismiss their wants. Instead, have them evaluate the trade-offs between their wants and time. Is the expensive bike worth mowing 10 lawns a week or can you buy a less expensive option?
Whatever the case, your children will look to you for guidance, not opinions, on how they can reach their goals.
What to Teach Your Children About Money at Middle School Age
Every kid has a piggy bank. The piggy bank is usually filled with money left from the tooth fairy or cash in a card from grandma. And usually it just sits there. The intentions are good with piggy banks: if you get money, put it in the bank to save it. But, that’s only part of the lesson.
What’s missing is: why are we doing the pomp and circumstance of putting the money in the piggy? Why are we saving and what are we saving for? And then what determines when that piggy gets opened, how do I get my money back?
Usually what happens is as the kid gets old enough he will open the piggy bank, take all the wrinkled bills out and go to the store to buy some toys. And poof! The money’s gone and the piggy is empty. We saved into the piggy bank all this time for that?!
The problem I have with piggy banks is that the kid is taught to save (that part is good) but then they are allowed to empty the savings and do whatever they want with the savings and deplete it. So, our kids are subconsciously being taught to put their money away and then use it all up at a later date.
What to Teach Your Children About Money at High School Age
Once your kids reach high school, they should be fairly familiar with money. Their financial goals will expand and their savings opportunities will become greater, especially if your kids have part-time jobs. At this age, they can begin to pay for some of their regular expenses, like going out to eat with friends or taking a trip to the movie theater. If they have a car, paying for their gas or insurance.
Learning how to support themselves at the high school age will improve their financial stability and outlook toward money going into adulthood. The concepts of spending strategies should also be introduced and put into practice.
Teach Your Children How to Spend Responsibly
This might include saving for college or a new car. Many people think teaching your kids about budgeting is the answer. Budgets can be overwhelming though, which is why I don’t like them.
In my opinion, budgets create a negative connotation with money. They make you feel like spending money is bad, when in reality, we need to spend money to survive.
Instead, implement a spending strategy with your children. Based on their bank account balances and how much they earn, come up with a plan on what a reasonable amount of money is to spend on going out with friends, clothes, activities, etc.
Educate them on finding the best prices or looking for a deal. Its important to take the time to create a spending strategy with your child and review it on a regular basis. This skill will carry them into adulthood.
Work with your Children to Get their Spending Back on Track
If your child begins spending outside of the set spending strategy, remind them of their financial goals, what you all decided was reasonable and create a plan to get back on track.
This could be limiting going out to eat for two weeks or picking up an extra shift. But also, maybe the allocation of $30/month on gas was not realistic.
Look at past spending and decide if that is the pattern your child will continue in the future. Spending more in one place, means you have to take away somewhere else though.
Understanding how to manage spending deviations is just as important as setting and sticking to a plan.
Introduce Investments to your High Schoolers to get them interested in the Stock Market
The concepts of investing and giving are also important at this age. Setting up a TD Ameritrade, Etrade or Fidelity account to allocate a portion of their paycheck is a good idea.
Recent reports found that 78% of adults aren’t ready for retirement. Establishing the benefits of investing will help your children break away from that statistic and be prepared for adulthood and then going into retirement.
Oftentimes, investing is not properly covered in high school, leaving your kids with no idea of how to become financially stable during retirement.
If we don’t teach our kids these money lessons now, how do we expect them to know them in when they are adults?
Be Open with your High Schooler Anout Money and what they are Expected to Contribute
The next steps after high school and the financial resources necessary should be discussed. Is your child planning on attending college? If so, what is the total cost? How are they going to pay for that?
Now, this isn’t to say that your kids should foot their entire college bill, but they should understand the financial impact this next phase of their life is going to create.
It may be worth your kids having some “skin in the game” by contributing to certain items like rent if they want to live off campus or upgrading to a higher food package. They may decide an extra $1,000 a semester for “fourth meal” isn’t worth it and they’ll just pay as they go.
If they are footing the bill, they may be a bit more choosy on the options they pick versus mom and dad covering everything.
What to Teach Your Children About Money at College Age
As your children graduate high school, it’s time to put all the pieces together. Everything that they’ve learned in the last 18 years will be put to use. They will need to learn how to fill out tax forms for a part time job, how to budget for books or a new laptop, and how they will afford going out to eat with friends.
You should be there to help them with any questions they have along the way, but use this time as a trial run of what adulthood will look like. If you bail your kids out every time they don’t have enough money to go to a concert or buy new clothes, they will most likely continue those habits into their adult life.
Also, tell them to stay away from all of the credit card offers. The free t shirt is not worth going into debt and paying interest! College is a good time though to introduce credit cards to your child. Get a card with a low credit limit. It should be something reasonable that your child can pay off every month. Putting some of the larger purchases on a credit card is a way to build credit and get in the habit of charging and then paying off the balance in full.
Another strategy for college age kids is giving them a lump sum for the semester. This forces them to budget for the next 3-4 months based on their priorities and financial goals.
Credit scores, evaluating full-time job offers, and finding the right housing are all found in the college stage. Be sure to create an environment of openness so your child can come to you with the job offer, you can look through the salary, 401k and benefits, weigh the pros and cons and make an informed decision. Making sure housing doesn’t take too large of a chunk out of income is another important lesson to carry into adulthood that should be taught at college age. Many adults get themselves into financial trouble that way.
Teach Your Children About Money at Every Age
Your children are going to learn about money through you. The way you look at and approach money will dictate your child’s relationship with money. Make the relationship a positive one, teach them the lessons today that they will carry into the future.
The money lessons your kids benefit most from can vary based on their current and future financial goals. Don’t forget to guide them through the save, spend, and give process, which can be found in our blog post here.
The money lessons you teach them will alter the trajectory of their adult life, making it important to prioritize. For more money tips, tricks, and lessons, check out our other blog posts.
If you feel like you need to brush up on smart financial strategies, request my Smart Money Moves Toolkit. If you like what you hear, schedule a meeting and start the conversation. Together we can determine how best to live in today while planning for the future.