Talk to Your Kids About Finances Talk to Your Kids About Finance

“Parents should teach kids about money at the same age that we teach our children to say please and thank you, how to share and how to brush their teeth. Children as young as age 4 associate the visible accumulation of coins with the abstract concept of saving. You are the most impactful teacher in a child’s life, so model the behavior you want them to see. Your money is easier to spend than theirs. Your kids understand more than you think and are more open to your ideas the younger they are. When talking to kids about the current financial situation, don’t say things are OK when they are not. Take time to explain to your kids what they already know from the tension in the house and from their friends at school.”

Children are constantly exposed to material goods and financial transactions, and without a proper explanation of the basics, they can grow up without a clear understanding of the value of money and how to use it.

The following are age-specific tips for teaching your child about spending, saving, and money management in practical ways.

Ages 2 to 4

Introduce coins to your child, helping him or her sort the coins by like kind and explaining the concept of equivalency (e.g., five pennies equal a nickel, two nickels equal a dime).

Give your child a clear jar, instead of a piggy bank, so he or she can see money accumulate and know it is still there.

Play a game of store with your child, using change from his or her jar or your own wallet. Play the part of a customer while your child is the cashier; then, switch roles.

Ages 5 to 7

As your child approaches school age, let him or her handle money on a regular basis so he or she can become comfortable with cash. Depending on your circumstances, you may start providing a small allowance. If you choose to give an allowance, be consistent and set some ground rules.

Establish a set allowance amount. You may consider having it correspond with your child’s age.

Determine whether your child will have to earn it. Do you expect your child to complete a few small weekly chores in exchange for the allowance, or will those household duties be kept separate?

Set expectations for what your child will need (or is allowed) to pay for from that allowance such as snacks, school lunch, outings, or video games.

Be consistent with rules, and pay the allowance on the same day each week.

Let your child learn from his or her mistakes. If your child chooses to spend the entire allowance on the day he or she receives it, point out the mistake without bailing him or her out.

Use the allowance as a tool to help teach money management, not as a method of punishment or reward.

Start discussing the concept of credit and debit cards. Your child surely has witnessed you withdrawing cash at the ATM or using credit cards to purchase everything from gas to groceries. Help your child make the connection that these cards represent money.

  • Take your child to the bank when you deposit money in your account.
  • Review credit card and bank statements with your child.
  • Let your child count the money that comes out of the ATM and review the receipt.

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