How to Teach Financial Lessons to Kids at Every Age

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Ever wondered when’s the right time to start talking to your kids about money? Turns out, teaching the value of a dollar should start as soon as your kid can understand it, and that means the answer is probably “now.” Because most financial habits are set by age 7, it’s in their best interest to start planting the seeds sooner than you might have thought. And sure, most toddlers probably think a nickel is worth more than a dime (it is bigger, after all), but you’d be surprised at how much they’re able to understand when taught in a developmentally-appropriate way. 

Talking about finances may not be your favorite dinnertime conversation, but teaching these lessons is more than just giving your kids an allowance or a piggy bank. The key is to meet your kids where they’re at. From playing store with your three-year-old to allowing your teenager to pay for their own gas, having key money conversations as they grow can be rewarding and fun—and could make all the difference in your child’s future financial success. 

Why Talk About Money?

Ongoing, open conversations about money help kids develop healthy relationships with spending, saving, and giving. 

A recent survey revealed that 83% of parents wished they’d learned more about finances growing up. But since money has historically been a taboo subject in our culture, many didn’t have the opportunity. Moreover, 59% of those parents still feel uncomfortable talking about finances with their children. This not only impacts how adults manage their day-to-day finances, but how they plan and meet their long term financial goals. 

Because financial literacy is not widely taught in schools, parents can take the lead to explain the basics. One survey found that almost half of teens felt their lack of economic understanding negatively impacted their ability to be financially successful. 

Furthermore, if parents are feeling financially stressed, it’s nearly impossible to hide it from their kids. In fact, kids report money as a primary stressor in their life more than you might think. A 2010 survey found that nearly nine in 10 children between eight and 15 believe their parents worry about money, and 58% worry about money themselves. A similar 2018 study out of the UK had 81% of children admitting they’re concerned about their family’s finances. That’s all to say, if you’re afraid that talking about money will cause your kids stress, don’t let that be an excuse. Because chances are, you aren’t hiding it as well as you think. 

Contrarily, creating the foundation to have a healthy, open dialogue with your kids can inspire them to feel more comfortable about their finances overall, which can help them make smarter money decisions in the future. 

How to Have the Money Talk

There’s something about the word “talk” that makes the subject sound a bit scarier. And “the money talk” is no exception. But the good news is, you don’t necessarily have to sit down with your kids and have a deep heart to heart about the value of a dollar to instill financial lessons. Bridge the subject with a sense of lightheartedness—and even fun!—and watch your kids grow into financially-responsible adults. 

Ages 2 – 5: Play “store.”

Did you know toddlers are actually old enough to learn about the concept of exchanging cash for goods and services? Sure, they might not understand why you may not be able to “afford” an overpriced toy, but the concept of trading one thing for another is well within their realm of understanding. 

Playing store is a fun and engaging way to help toddlers start to understand commerce. You can use real goods like cereal boxes or cans, or opt for a toy cash register and products. Asking about prices can teach kids the concept of costs, even if at first they think an apple is worth $100.

For younger toddlers, a game of tracing coins and identifying them is an easy way to get toddlers familiar with money. Just be sure they don’t put small coins in their mouths. 

Ages 5 – 10: Use an allowance to teach saving.

Kids asking for money starts early. By the time your child enters elementary school, they might be asking for cash to buy a snack or for spending money for a field trip. If your budget allows, experts recommend starting to give children allowances when they start voicing what they want. This, according to the American Institute of CPAs, is when parents can lay the foundations for budgeting—that is, delaying impulse buying and saving for a goal. 

There’s no one-size-fits-all strategy when it comes to structuring an allowance. But most parents give allowances their kids have to earn based on their child’s age range and what they can afford. Weekly amounts range from $4.56 for four-year-olds to $11.50 for 14-year-olds on average, according to a report conducted by the allowance app RoosterMoney in 2021. That being said, the mostly widely accepted rate is $1 dollar per week based on age. So a 5-year-old would receive $5 per week, and a 10-year-old would receive $10 per week. 

As parents, you can structure an allowance however you want, and create opportunities for your kids to earn money—whether that be by doing extra chores or good deeds. But make sure you’re both on the same page about how it works. You don’t want your kid demanding a dollar for brushing their teeth.

Giving an allowance helps impart the concept of saving. When your child wants a new toy, it might take weeks or months to save up their weekly allowance. This might mean making choices not to buy smaller, cheaper items with their allowance so they can more quickly get the larger item they want to buy. 

If giving a monetary allowance is out of budget, there’s still ways to teach the foundations of earning and saving. For example, you might use marbles as currency, and create a system where a certain number of marbles earns treats—like extra screen time or a scoop of ice cream. 

Ages 11 – 15: Open a savings account.

By the time they enter middle school, most kids think they’re ready for the real world. And as a parent, helping them open up their own bank account can demonstrate to them that you think they are, too. 

But more importantly, a savings account helps pre-teens and young teenagers put their saving experience into practice. Now, the money isn’t living in a piggy bank where they can easily access it. Instead, it’s held by an institution where it’s harder to access, but growing with interest. 

Some banks even offer a passbook for children’s savings accounts. This is a physical book your child can keep and bring to the bank with them when they deposit a transaction. This is a way for kids to keep track of their savings in a way that makes them feel responsible and adult, which can lay the foundation for financial independence. 

Ages 16 – 18: Put it into practice.

When teens start driving, it’s an ideal time to teach real-life expenses. If they have their own car, they can pay for all or part of the costs—especially if they have a weekend job. They’ll see how registration, insurance, gas, and repairs add up and learn to set aside money for these “adulting” expenses. 

“Real life” in college and beyond can be a financial shock following the low overhead of living at home. By easing them into budgeting and saving with something simple like paying their own car expenses, you can help set your kids up for success as they enter adulthood. 

If your teen doesn’t drive or have a car, you can teach the same concepts by asking them to contribute to their phone or phone plan. Though many kids share their parents’ accounts, having to pay a set amount each month puts their budgeting knowledge into real life practice. Plus, if you wanted, you could always siphon that money into an account and gift it to them at their high school graduation. 

This is also a great time to begin teaching teens about investing beyond a savings account. A high-yield savings account or a custodial-account mutual fund can be used to start a nest egg early. By starting this practice in high school while they’re still under your roof, you can instill in them the importance of putting money away so that it works for them in the future. This is a lesson many adults don’t practice now, and can give your child an edge as they enter the workforce later in life. 

The Bottom Line

When it comes to talking to kids about money, the sooner you can start the better. And having frequent, casual money conversations can demonstrate to kids money isn’t something to be intimidated by. Rather, it’s a tool that can be used to your advantage. Even when you enter into stickier topics—like asking your teen to pay for their own gas!—staying the course and following through will instill in them financial lessons they can carry with them forever.