by Lyle Daly | June 20, 2019
With a few helpful pointers, your kids will be on track for financial success.
It's safe to say that parenting comes with a whole slew of responsibilities. You have to keep your kids happy and healthy. You have to ensure they get a good education. And, if you want to avoid hearing them ask you for gas money until they're 30, you have to teach them about money.
Giving your kids financial advice can be tough. It's very easy to bore them and have your advice go in one ear and out the other. After all, there aren't a lot of middle schoolers who want to learn about 401(k)s.
The key to teaching your kids financial lessons that they remember is to tailor your advice to their age group. With the lesson plan below, your kids will know the ins and outs of personal finance by the time they leave home.
When your kids are barely past their toddler years, you need to stick to the basics. At about four to five years old, it's a good time to introduce them to the concept of money and how money is used.
Studies have shown that children can grasp the idea of exchanging money for goods at this point, but they might have trouble understanding the values of different pieces of money.
Here are some simple ways to start teaching your kids about money:
By the time your kids are seven or eight years old, they'll have some understanding that adults work for their money, so you can introduce how earning money works.
A popular way to do this is to give them money when they do their chores. You could even make a chart with the chores they can do and how much you'll pay them for each one.
This age range is also when children can comprehend the value of money and when they develop the ability to plan ahead, which makes it perfect for their first lessons on saving.
Encourage them to set savings goals for the things they want. For example, if they want to buy a game, explain how they'll need to set aside some of their chore money for the next two weeks instead of spending it all.
Once your kids are in middle school, they'll be ready for more advanced financial concepts. They'll probably be doing more challenging chores and earning more as a result, and they'll have a few years of experience with saving money.
With more pocket money and more knowledge about saving, setting them up with their own bank account is a logical next step.
You may want to take them to your own bank, or you can check out the best bank accounts to find one that won't charge any maintenance fees, even for accounts that don't have large balances.
After opening a bank account, make sure you go over:
These could be the last years of you and your kids living together before they set out on their own, so this is where you get them ready for "the real world." There are two key concepts they'll need to understand: making a budget and borrowing money.
Teenagers tend to have more expenses than younger kids, and they also earn more money, whether that's still from chores or from a job. That means you'll have the opportunity to draw up a budget with them. Here's how:
High school is also when you can explain how borrowing money works, and that when you borrow money, the lender will charge you interest. From there, you can go into the subject of credit scores, explaining how credit scores are calculated and how your score affects the amount of interest you pay.
Since credit cards are one of the first ways many young adults borrow money, you should make sure to cover the dangers of carrying a balance on a credit card. One smart way to teach your kids about responsible credit card use is to make them authorized users on your own card to show them exactly how it works.
Sooner or later, your kids will be ready to move out and start their own lives. At this stage, it's wise to go over a few things with them to ensure that they're prepared:
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