Do you remember when you first learned about saving money or when you applied for your very first credit card? What about the first time you balanced your checkbook? OK, now do you remember who taught you to do all of those things? Learning how to manage money is a childhood milestone that is right up there with losing a tooth or riding a bike for the first time.
Teaching your children about money is imperative as a parent, especially if you want to avoid shelling out cash for your child’s latest video game obsession or paying off their credit card well after they’ve reached adulthood.
You might be asking - when do I start? It depends on your child, but slowly sprinkling in financial lessons throughout childhood is a good way to ease into the discussion, (especially when they are very young), and to build good habits.
Here is an age-by-age guide to help you identify reasonable topics for each stage of your child’s financial development:
Early years - 5 and under
- Children under five may not be able to grasp what money is, let alone how to manage it. Start small by helping them identify pennies, nickels and dimes and make it fun by letting them put your spare change in their piggy bank.
- You can also invent games to play to help them begin to understand the concept of paying for things such as a grocery store checkout or pretend to be at a restaurant and pay the bill.
- Once they are old enough to do small chores like picking up their toys, consider giving them a small allowance and teaching them how to save up for something they want. This teaches both responsibility and how to set financial goals (although you may end up paying the difference for whatever they choose to buy since young children often like to pick the most expensive toy regardless if they have socked away $1 or $100).
Elementary (hitting double digits) - 6-10 years old
- This is when children can really start to understand what it means to save money. It’s a great age to take a trip to the bank and open their first savings account. While at the bank, you can explain how their money will add up every time they make a deposit and vice versa when they withdraw money.
- You can also explain what it means for their money to earn interest, although this concept is still a little complicated, but basically the bank rewards them for saving money. Sharing monthly bank statements that highlight interest payments can be a good way to help them understand how it benefits them. The more money they put into the savings account, the more “free” money they get every month.
- This can be a great time to start a coin collection and establish a regular allowance. Children are often motivated by rewards and given cost of some video games ($50 a game!), it’s smart to get them thinking about how hard they have to work to save up enough money for one game, toy, pair of sneakers, etc. Once children begin to understand the value of money and how far a dollar goes, it’s easier to begin explaining budgeting to them.
- Another fun way to teach your child about money is to have them set up a lemonade stand (or apple cider stand in the fall) and encourage them to determine the price of the lemonade. It will be a fun to see the little entrepreneur’s excitement with every cup they sell!
Take Our Quiz To Learn More About Different Types Of Savings Accounts!
Middle years - 11-14 years old
- Discuss the importance of budgeting. If your tween/teen wants to go to the movies with their friends, they may not have enough money left over to buy a gigantic tub of popcorn and extra large slushy.
- If they have a newspaper route, babysit or mow lawns, help them sock away that money rather than spending it on the latest technology or fashion. Skipping a new pair of boots or video game right now could result in larger rewards such as a car when they reach their late teens.
- Teach them how to comparison shop for the items they want in order to find the best prices. Better yet, show them how to use coupons to save even more!
- Talk to your kids about what their goals are for their money - going to the arcade with their friends or using it to buy a more expensive item?
Teen years - 15-18 years old
- As scary as it may seem, your child will be getting his/her license. Explain the difference between the cost and value of a new versus used car, as well as car insurance and gas. The sticker shock of insurance premiums for new drivers is good preparation for the college tuition
- This is the perfect age for a first job. Help your teen figure out how to earn their first paycheck and the responsibility that comes with making money. And when they get their first check, you can explain the cold, hard reality of paying taxes on their income.
- They’ve been accepted to college. Make sure they know how much money they will need to live on campus and whether they will have to get a part-time job to help cover room and board, books and entertainment (and maybe pay for spring break).
- Teach them how to either avoid or manage college debt by discussing how much they’ll need in loans and what they’ll owe once their student loan payment kicks in.
- Encourage your child to open a student checking account. Many banks, like Rockland Trust, offer free student checking accounts with no minimum required.
- Discuss the importance and benefits of a rainy day or emergency fund for things like car repairs or even medical emergency co-payments.
College and early adulthood - 19-24 years old
- Discuss what a credit score is and how to increase it/ruin it. Having a solid budget in place will help them avoid late payments and dents in their credit. Also, make sure they know how to check their credit report for mistakes.
- Help them determine whether it’s the right time to apply for a credit card and the financial consequences of only paying the minimum payment every month.
- If they have rent or other expenses, it’s important they pay bills on time or set aside enough money throughout the month to cover those late-night pizza deliveries or date nights.
- Once they’ve graduated from college or landed their first job, instill in them the importance of saving early and often for retirement.
25 and up:
- They’ve (hopefully) flown the nest but may need refreshers and advice about budgeting, saving and retirement planning.
- Help them plan for a life event - buying a house, taking a trip, planning a wedding.
- If babies are in their future, make sure they know the costs of diapers, daycare and all the expenses that go into raising and caring for a child, including paying for private school and eventually, for college.
Rockland Trust can help your family no matter what stage of saving or spending you’re in...
