There are a lot of good reasons to teach your kids about money. For one, you don’t want your children repeating your financial mistakes. Also, if you raise financially savvy adults, chances are they won’t someday be asking you for money. By helping them, you’re helping yourself.
Teaching your children about money is also simply the right thing to do.
Whatever your motivations, it can be a challenge to figure out how to impart your hard-earned financial wisdom. For instance, at what age do you start? How deep into the weeds should you go? Is it better to show them how to manage money rather than just tell them?
[Read: How to Save Money for Your Kids]
How to Teach Your Kids About Money
As you can imagine, there are many approaches to teaching your child about money. Some parents believe in allowances; others don’t. Some companies market debit cards to elementary school children, and some parents think that’s an inappropriate age to be learning about a debit card, no matter how many parental controls are instituted.
What matters, of course, is what you think. But here a few general rules of the road:
Talk to your kids about money. Mitchell Kraus, founder of Capital Intelligence Associates in Santa Monica, California, echoes what many experts say: “The best way parents can teach their children good financial habits is by discussing the money decisions that they make.”
Kraus acknowledges that everyone makes different financial decisions, but you should at least discuss your thinking on spending and saving with your kids.
“Most Americans have a choice on how to spend their money,” he says. “Some choose nicer cars and houses. Some choose experiences. Going over the choices with your children helps them understand your values and that life is full of choices.”
Consider an allowance.There are good arguments for not giving your child an allowance. Some experts say children shouldn’t get paid for doing expected chores around the house. But as Kraus points out, “Giving a child a small allowance also helps children learn about making choices with their money.”
Continue discussing finances with your child and eventual teenager.Don’t make it a one-and-done conversation. “Where most parents stop short is following up with the children on how well those choices turned out and what choices they might want to make in the future,” Kraus says. “Across cultures, there are stories about great wealth being lost in three generations. The first generation works hard and lives on a tight budget to create the wealth. The second generation sees the hard work and sacrifice and understands that choices need to be made about money. The third generation has never heard a fight at the dinner table about money and tends to blow everything, not understanding its value.”
Get your child involved in charitable giving. This could be something you do at church, or you and your child could raise money for a good cause.
“Engaging your children in thoughtful philanthropy is a hands-on way to share your family’s values and teach your children about saving and giving back to their community,” says Ross Cohen, a certified financial planner and wealth advisor at Bartlett Wealth Management, a firm with offices in Cincinnati and Chicago.
Consider making earning money a competition. If you have more than one child, you could turn money-making into a contest.
“That always brings out the competitive nature of the kids. Whichever child saves the most gets the biggest special treat or bonus,” says Lamar Brabham, CEO of Noel Taylor Agency, a financial services firm in North Myrtle Beach, South Carolina.
Obviously, you want to make sure both kids will be good sports if they lose — and you could always have a series of contests, increasing the odds that both siblings may end up winning a competition.
It will help, though, if you make teaching your kids about finance fun, Brabham says, pointing out that a lot of adults find the world of finance less than enjoyable.
“Words like boring, confusing, complicated and scary are common when hearing someone describe money matters. You can imagine what children think of it,” he says.
[READ: Ways to Save for Your Child’s College Education]
Ideas for Your Kids to Earn Money Right Away
Another way for kids to learn a lot about money is by earning it. Depending on the age of your child, you may need to assist with some of these ideas.
— Babysitting.
— Yard work for a neighbor.
— House and/or pet sit for vacationing neighbors.
— Sell crafts on a website, such as Etsy.
— Organize a yard or garage sale.
— Shovel driveways for neighbors in the winter.
— Do extra chores for money.
— Wash neighbors’ cars.
— Collect recyclables.
— Tutoring.
Ideas for Teaching Your Kid About Money by Age Group
The earlier you teach your kids about money, the better, many experts say.
“Like physical exercise, financial exercise can become a habit that changes their life forever. Don’t wait. Start today. Your kids will thank you when they get older,” Brabham says.
That said, you’re going to teach a 5-year-old about money differently than a 15-year-old. Here are some ideas.
For younger kids.Your 3-year-old doesn’t have to be oblivious about money.
Melanie Hopkins, founder of Finance Friend, a financial consulting firm in Brooklyn, has a good idea for parents of children as young as 3 or even 2.
“When they get a treat at the bakery or a toy at the toy store, let them hand the cash or credit card to the cashier,” Hopkins says. “That helps them to understand that money is transactional, which is a core concept that you can build on as they get older.”
You could also let your kids handle play money — and have them “pay you” in exchange to get various things throughout the day. They could play store or house with an actual budget.
In particular, Kris Jerke, president of Ascend Financial in Sioux Falls, South Dakota, likes the idea of using jelly beans as cash. The way he sees it, you give your kids 30 jellybeans or an amount you think sounds about right, and they can spend the jellybeans throughout the day.
“You can determine what other things you want to charge for special treats or use of some favorite toys,” Jerke says.
For elementary school kids. Board games are a fun way to impart financial lessons. “As funny as it sounds, Monopoly is a great game to play with children to begin the concepts of money,” says Aaron Leak, founder of ECL Private Wealth Management in Rockford, Illinois.
He says older elementary school kids can handle more complicated financial transactions, as long as you’re leading the way, of course, and monitoring their finances.
“The earlier kids understand money the better,” Leak says.
He says that after his 13-year-old daughter does chores, he transfers money to her account. She has had her own debit card for at least a year now.
“She also has her own investment account, where we discuss and talk about how investments work,” Leak says.
For teenagers.Leak is enthusiastic about teenagers learning about investing. And at some point, if you think your teen should get a part-time job, that’s not a bad idea, many financial experts say.
“As a young teenager, you can babysit, mow lawns or referee sports. As they get older, there are opportunities to work in retail or hospitality,” Cohen says.
[Read: 15 Creative Ways to Save Money.]
Should Your Child Have a Debit Card?
That’s up to you, of course, but Craig Everett, a professor of finance at Pepperdine Graziadio Business School, doesn’t even think your college student should have a credit card — and has some interesting reasoning.
“I do not recommend credit cards for anyone under 25. The frontal lobe, which allows people to connect current actions with long-term consequences, does not fully develop until the mid-20s,” Everett says. “Credit cards allow current spending that may have significant negative future impacts, so incomplete brain development can have disastrous financial consequences for these people who are just starting their adult life.”
He recommends that parents encourage their adult children to use debit cards exclusively until age 25. Everett admits that your adult kids are unlikely to follow your advice, but “it can’t hurt to try,” he says.
But Everett isn’t crazy about the idea of young children, particularly those under age 8, having debit cards.
“In my experience, debit cards are not very useful in teaching young children about money because the card is only an abstraction and looks the same regardless of how much money is in the account. Using physical cash is much more effective in teaching kids about the value of money,” Everett says. “For kids under 8 years of age, coins are the most effective because of the differences in size and weight. Young children really enjoy activities of counting and exchanging coins.”
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Ways to Teach Kids About Money originally appeared on usnews.com
Update 04/29/22: This story was published at an earlier date and has been updated with new information.
