Disclaimer: This post is sponsored by PSECU, a Pennsylvania-based credit union.
Do you ever wonder the right age to teach your kids about money?
Have you considered what should you be teaching your kids about money? What are age-appropriate lessons to teach your kids about money?
You have probably noticed children begin forming attitudes about money when they are young. They recognize quickly money is important. Have you ever seen a 1-year-old or 2-year-old open a birthday card with a few one-dollar bills inside? As soon as they see the dollar bills, they smile big, grab the dollars and wave them around like they have won the lottery. Even little ones that barely speak know the importance of this green paper.
Learning how to value money should be taught from early ages. As a parent, you want to make sure the attitude your kids develop about money is positive.
How do you teach financial literacy for kids? It begins by teaching responsibility with money and how to make good decisions with money in your daily life when your child is young. It also entails letting them make mistakes while doing so costs little. Here are some suggested activities and lessons for each stage of your child’s life. Follow these tips to foster healthy money management in your little ones.
How to Teach Your Kids About Money
Teaching About Money Before Your Child is Born
When you’re picking out mobiles and a crib, you’re probably not thinking too much about your unborn child’s financial future. However, the choices you make now influence how successful and comfortable they’ll be later in life.
It’s the perfect time to establish a savings account for your child. You may also open an investment account for them or dedicate a section of your own portfolio to their future needs. Eventually, your children will need to attend school, college and buy a home. If you start saving for them now, you provide additional time for your money to go to work for them. The compounded interest will give them a solid start on their own lives.
The first money lesson is teaching your children to save money early and not spending every penny.
Teaching Preschoolers About Money
When your child begins walking, it’s time to lay the foundation for sound money management. Provide each kid with three piggy banks, each one labeled for a specific goal.
The first piggy bank is for spending money. This is where kids can deposit random earnings from doing chores like picking up toys and spend as they wish. Perhaps they could buy a special item on your weekly grocery trip.
The second piggy bank is for medium-term savings. Here, they save money for a year or another period you choose. At the end of that time, they spend the money on something they want but is considered a splurge, like a new gaming console.
The third piggy bank they do not touch until they go off to college or get ready to retire. This teaches the importance of saving money for long term goals and your golden retirement years.
The second money lesson is teaching your children to set money goals.
Teaching Elementary Students About Money
When your children move to elementary school, it’s time to teach them to differentiate economic needs from wants. For example, needs consist of things like food, housing and yes, toilet tissue. Wants, conversely, include things like designer clothing. Everyone needs to dress, but they don’t need a fancy name on their lapel.
Now is the time, too, to teach children that performing work brings money. Instead of giving the little ones an allowance, pay them for doing certain chores like drying dishes or making their beds. This empowers them to take charge of their earnings by performing additional labor when saving for something they desire.
When your child has earned money or is given money (for example, birthday gifts or Christmas gifts), start teaching them how to spend their money well. They can continue the using the piggy bank method (some to spend, some to save). And when they go shopping, encourage them to use the money well and skip impulse buys. Encourage them to spend money on items of value they will enjoy for a long time, not just things they consume and are gone.
The third money lesson is understanding the difference in needs and wants and how this impacts the way we spend our money.
Financial Literacy Lessons for Middle School
As children get a little older and reach middle school, it’s time to teach them the concept of opportunity cost. Money is limited by nature, and spending some on one item means having less to spend on something else.
Before going to the grocery store with your 10-year-old, inform them of your budget and let them help you make the list. At the store, allow them to select items, and encourage them to choose lower-priced options. That way, they can reserve some cash for items they want most. Make it a challenge to exit the store without going over budget.
When your kids reach the preteen years, you want them to begin saving for college and adult life. Now is the time to teach children the importance of creating an emergency fund so they don’t need to borrow when an unexpected expense arises.
This is also the time to share savings account information with your youth. Show them how their money compounds over time. Encourage them to contribute, especially if you permit them to take on a small, part-time job.
The fourth money lesson is that money is limited and we have to choose wisely how we spend our money.
Money Management for Teens
Your teens are getting ready to leave the nest and be on their own. Now is the time to sit them down and discuss debt and loans. Few enjoy carrying debt, but loans enable people to attend college and purchase homes. Coach your teen on the importance of maintaining a positive credit rating by paying debts on time and avoiding excessive borrowing.
Encourage your teen to have a part-time job and start paying for personal items they need and want. Teens with jobs can start purchasing their own clothes, paying for gas to drive the car and car insurance, providing their own spending money when going out with friends.
You also do well to teach teens about investing. You can play the stock market game as a family to help them overcome their fear of the market. You can also educate them about vehicles like mutual funds, which mitigate risks somewhat.
The fifth money lesson is handling money wisely by avoiding short term debt and using loans for larger purchases like homes and cars and learning to invest and plan for lifelong savings.
Preparing Youth to Spread Their Wings
As a mon, you have the responsibility to teach your children about sound money management. You want your children to be financially literate adults.
By starting young and teaching consistent lessons throughout life, you can prepare your children to become financially literate adults and ready to successfully manage money on their own.
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