Money is everywhere. On a daily basis, we earn it,
borrow it, read about it and watch it on TV ? and until recently, most
people thought only adults spent it. According to CBS News, in 1983
companies spent $100 million marketing to kids; today, that figure is
closer to $17 billion, and with good reason. PBS estimates that teens
will spend about $155 billion this year ? and that doesn?t include kids
who strongly influence their parents spending habits.
So how do parents make sure their children are making
the right financial decisions? As with every other parenting quandary,
the answer is to keep your child?s age in mind and do what works best
for you and your family. Here?s a list of age-appropriate money lessons
for kids as they grow.
AGES 3-5
This is a great time to start teaching your kids
about money and to introduce your children to coins. Play a game of
identifying them and their worth. Most kids at this age will pick a
nickel over a dime because it?s bigger. Don?t sweat it ? as they get
older, kids will figure out the dime is worth more. Introduce your child
to the concept of waiting. Talk about taking turns waiting for the
slide or the swing and then talk about waiting to spend money. At this
point, it?s about engaging your child in your daily life. When you go to
the ATM, tell your toddler that mommy or daddy had to work to put money
in the bank so they can take it out.
AGES 6-10
Most families introduce the concept of an allowance
at this point. No matter how you set up this financial part of your
life, teaching kids the concept of saving for a long-term goal is
critical. Talk to your child about a small toy or game he wants, then
help him set up a jar or envelope to save for it. Continue engaging your
child in your daily financial life by discussing how you set aside part
of your paycheck for emergencies.
Encourage your kids to save some of their money, but
don?t be discouraged if they don?t. The rainy day fund is not an easy
concept ? there are a lot of adults who still don?t get it. This is also
a great age to bring up the concept of ?needs? versus ?wants.? When
you?re at the grocery store, talk to your kids about what is a necessity
(milk) versus a treat (cookies).
AGES 11-13
Tweens love to hang around the mall. This is a good
time to talk to them about comparison shopping. Discuss the difference
between name brands and generics and whether one is really better than
the other. This is also a great time to teach your kids about interest
rates, and how they can work for or against you. Start to talk about
long-term investing and introduce the idea of responsible credit use and
living within your means.
AGES 14-18
Teens in this age bracket have a number of
responsibilities: getting a driving license, finding a summer job and
applying to college. Within a few short years, they?ll be completely out
of the nest. If you haven?t had any discussions about money, now is the
time. Decide on a monthly budget with your teen and then have him
manage his own money. Discuss good money management practices, like
always having a cushion and not letting the account balance get too low.
Let your teens make the painful mistakes now, when they are small.
Better to bounce a check at 17 then have a car repossessed at 25.
If your teen plans to go to college, have a frank
discussion about how much college costs and how much you can contribute.
There are many great online tools for determining college costs, such
as the U.S. Department of Education?s College Scorecard. There are also
financial calculators that will help you show your teen how much student
loans could cost if they decide to go that route.
Many parents also provide their teens with a credit
card for emergencies at this point. Be specific about which purchases
are allowed and define what an emergency is. Their definition (the boots
that everyone is wearing) versus yours (running out of gas) could be
very different.
A lot of kids get their first job during these years.
Your teen?s first paycheck may be smaller than anticipated; take this
opportunity to start briefing him on taxes.
