It’s Never Too Soon (or too late) to Teach Kids about Money

Money in the bank. Good credit. Manageable debt. These are the building blocks of financial freedom.

The earlier kids start to understand the concept of smart money management, the greater their chances of financial security down the road. Here are some ways you can start reinforcing financial concepts with kids from 2 to 22.

Preschoolers

Very young children like to collect things and play with their collections.  This is a great opportunity to teach kids about money, so make it fun. Ensure your preschooler has a piggy bank that makes noise when they shake it, then help them dump all their coins on the floor and put them in piles. Help them understand that by putting their money in a safe place, it will be there for them when they want to use it. Ask them to bring some of their coins when you go shopping and have them help put change in parking meters. At this age, the goal is to teach them that money is valuable and can be exchanged for other things.  Two good books you can read with your preschoolers about money are  A Dollar for Penny and Benny’s Pennies.

Elementary Schoolers

When kids start learning about money in school, they learn that different coins have different values, and when added together can actually be used to purchase things. This is a good time to talk about “wants” vs. “needs” and helping them set short and long term goals to purchase things they want. While their needs are still minimal, help them get used to dividing their money into 3 categories – saving, spending and donating, then have them pick a favorite cause to support.  Make sure it’s something visual, where they can see the impact of their donation.  For example,  World Wildlife Fund has a “species adoption” program that will help your child learn about an endangered species via fact cards and photos.  They will even send a stuffed animal for donations over $55.

Pre-Teens

At this age, many kids have small sources of cash: birthday envelopes from Grandma, payment for “above and beyond” chores, weekly allowances. If your kids don’t already have a savings account, this is a good age to set one up – most banks have savings accounts for kids that carry zero interest. A good practice is to help them set short term goals, then schedule a “meeting” with your child once a month to review their account and talk about their progress toward reaching their goals. This helps them get into the habit of monitoring their accounts and reminds them to keep contributing.  Bank of America has some great advice for talking to pre-teens about money here.

Teenagers

This is the age of the part-time job. Babysitting, dog walking, lawn mowing, coupled with a monthly allowance mean an infusion of cash that will test the resistance of most teens. This is a good time to put some structures in place to help them take charge of their own money. Help them figure out how much they need each month for clothes, cell phones, vacation spending money, and hammer out a budget. Importantly, warn them about identity theft. A 2012 study by AllClear ID, an identity-theft protection company, showed that minors are 35 times more likely than adults to have their identity stolen. Warn your teen about the importance of safeguarding their name, Social Security number, and bank account information.

A Note about College Kids

Once they’re in college, kids should be responsible for making their spending money last for a whole semester and contributing toward living expenses. Importantly, they will be receiving credit card offers that seem to supply free money – have conversations early to ensure they don’t sign their lives away at 18.

Remember, healthy spending habits can be learned. Talk to your kids about money early and often and give them the tools to make smart decisions.