Money milestones

Teaching your child how to use and grow their finances

While personal finance has found its way into a number of schools, it’s not a nationwide requirement.

The Council for Economic Education’s 2020 Survey of the States found that only 21 states require personal finance classes for students. However, an even smaller minority of these states, six in total, actually require standalone personal finance courses, while 15 states require personal finance coursework to be incorporated in another class. In states like California, Nevada and even in Washington, D.C., personal finance isn’t included in state standards at all.

With fewer than half of all states in the U.S. offering any personal finance in schools, parents have their work cut out for them when it comes to teaching children how money works and how to make money work for them.

According to Tanya Van Court, the CEO of family savings app Goalsetter and a former executive at Nickelodeon, Discovery Education and ESPN, financial lessons can be spread out over the years. There’s no need to cram every piece of money advice into one teachable moment. In fact, there’s a lesson to learn at nearly every age from birth to 18. You can start, Van Court said, with opening a savings account for the newest addition to your family.

“There’s no reason that we can give thousands of dollars in baby shower gifts and we can’t set aside $100 to set up a savings account for every kid in this country,” Van Court said.

Once you’ve established a solid financial foundation, Van Court said it’s important to show children the most effective ways to use, grow and even share their money whether you’re sending them to their first day of kindergarten or preparing to kiss them goodbye before college.

Here are the main lessons to teach your child about money from ages 5 to 18.

Ages 5 through 9

Ages 5 through 9 for children should be focused on three main concepts, Van Court said: “skills, saving and sharing.” Five- and 6-year-olds should learn the basics of money, which includes how money can be exchanged for items and services and that different things cost different amounts. Children at this age should also learn that money is finite, and while you can buy some things, you can’t buy everything.

“They learn that if you have money in your hand, you can go into a store and exchange it for what you want,” Van Court said.

But, if things cost different amounts, and you can run out of money, prioritizing also becomes important.

“Then you’ve got to determine what are the things that you are going to buy based on what you need (or) what you want,” Van Court said.

Skills, saving and budgeting come into play between 7 and 8 as children start doing chores for money and wanting pricier items.

“How can you find things to do? How can you develop skills that are valuable to people? So, if you’re the best one who sweeps the stairs or you’re the best one who cleans the bathroom, that’s a valuable skill in mom’s household,” Van Court said.

In addition to being organized about finances and identifying marketable skills, Van Court said parents should focus on teaching children about delayed gratification.

“You can buy bigger things if you wait for them,” Van Court said. “So at 8, you can teach them that saving and delayed gratification are really important to get the things that you really want.”

The lesson about waiting and saving for good things can also be a segue into another higher-level money lesson: generosity.

“At 9 years old, that’s when they start to really understand their place in a larger world,” Van Court said. “And so the lesson I really like to focus on there is, it doesn’t feel so good buying everything you want if other kids can’t even buy enough food to eat.”

Learning to share with others early will make it commonplace for children to think of others as they get older, Van Court said.

10-plus years old

The age of 10 is when discussions about investing should begin, Van Court said.

“You teach them about investment accounts, you teach them about interest, you teach them about compound interest because the only way our kids are going to build wealth and truly have choices in society and freedom is if they are investors,” she said. “You can’t save your way to wealth.”

At around 12, Van Court said budgeting should be reemphasized, not only as a way to save for things a child wants but also as a way to reserve money to invest.

“The more money you spend, the less money you have to invest and grow,” Van Court said.

Teenagers

One of the last money lessons an adolescent should learn is about the benefits — and dangers — of credit cards.

While credit cards can be helpful for establishing a positive credit history and making necessary big purchases, it’s important to keep spending in check, Van Court said. “Credit cards are like a sometime-y friend. They feel good when you go on vacation with them, but when it takes 10 years of minimum payments to pay back that $2,500 vacation, then they feel like a stalker who won’t go away and you just want them to go away.”

Van Court said parents should insist that their teens not take out more credit than they can afford to pay back. “The more credit you have, the further you are from being rich.”

Also, during this time when most of the country has been touched by the economic damage brought on by the coronavirus outbreak, Van Court said it’s essential to teach kids about money so they can weather whatever financial storms come their way.

“Now is the time that we need to be teaching our kids the most about financial literacy,” Van Court said. “You’re not in school all day, but you can absolutely be developing skills because skills are what earn you money, right? So that’s one big lesson. The second big lesson in the time of COVID-19 is they can’t leave the house to spend any of their money, let’s teach them to save it and develop goals … let’s get them to be goal-oriented.”

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