As parents, we're sometimes a bit torn between letting our kids play sports and protecting them from injury. Similarly, the instinct to protect our kids from life's economic realities sometimes gets in the way of giving them the financial education they need. How can we teach money management to our kids without overwhelming them or fostering a fixation of dollars and cents? Here are suggestions divided into age-appropriate stages according to children's natural development.
Stage 1 (5-8 years)
Most 5-8 year olds have fairly short attention spans, lots of energy, and are beginning to see that fairness is important. During stage 1, they can be taught that money has a purpose and that wants are different from needs.
Here are some ways to introduce basic money skills to your 5-8 year-old:
Get separate containers for spending, saving, and tithing.
Never be afraid to say, “We can’t afford it.”
Never be afraid to say, “We can afford it, but that is not something that we want to spend our money on.”
When dining out, give your child a menu and a dollar amount. Have her order her own meal.
Stage 2 (9-12 year)
Remember when you were 10 or 12 and everything seemed to matter deeply to you? Children in this stage are morphing from little kids to “tweens” perched on the edge of independence.
During Stage 2, children will be more interested in the money they have earned. Help them towards this growth:
Research the going rate for babysitting, lawn mowing, and other chores by interviewing friends.
Read a story about an entrepreneur who has turned passion into a business.
With help, develop an interest into a small-business venture.
Stage 3 (13-15 years)
Your “child” is now becoming an individual with unique ideals and values. Don’t let these natural changes deter you, however, from raising a financially fit kid.
Your young teenager should be able to shop comparatively, understand interest and dividends, and commit to a goal in her savings account. During this stage, parents can help children do the following activities:
Search for the average pay from a list of ten jobs. Ask them the salary difference between entry-level jobs and salaries for jobs requiring 10-plus years of experience.
Talk about ads shown on TV. Ask them to critique the ad for qualities such as accuracy, honesty and value.
Buy stock in a company that has meaning to them and review that annual report.
Stage 4 (16-18years)
By the time your children are juniors and seniors in high school, they should be focused on how to develop and manage their own finances. Help them keep in mind that as they prepare for college or that first full-time job, they’re both vulnerable to the larger world and a part of it.
At this stage, your teen should be able to save, spend and invest money. There are many things that 16-18 year-olds can do to prepare themselves for the future:
Ask them to fill out their own college financial forms. Let them interview you for any answers they don’t know.
Ask, “What kind of person do you want to be, and how will you budget for that?”
Remind them of things they can do that are entrepreneurial.
Parents who teach their growing children to manage money are investing in their future economic security—and enjoyment of life.