Start now to teach children about money
APRIL ISN’T only about paying your taxes. It’s also National Financial Literacy Month, when the focus is on teaching Americans of all ages the importance of learning and maintaining strong financial habits.
It’s an excellent time to teach children the fundamentals. Here’s a guide to what they should be learning at different age levels. l Ages 2-3. It’s never too early! Kids at this age can be taught to differentiate between different coins and bills — which is a great way to help them develop their counting skills, too. This is also an age when you can start discussing wants versus needs. l Ages 4-6. You might be inclined to leave your little ones at home when you have shopping to do, but going to the store presents an excellent opportunity to demonstrate how purchase transactions work.
Also, set up a savings account in their name if you haven’t already. When they receive money as a gift, bring them to the bank and show them how depositing works and how their bank balance increases in their passbook. l Ages 7-9. This is a good age for giving a weekly allowance. If kids earn it by doing chores, they can see the cause and effect of their hard work.
You can also give them control over this money so they can learn about saving versus spending. Allow them to choose things they want at the store and conduct the transaction themselves. They will learn very quickly how to make smart purchasing decisions. l Ages 10-14. Set up a checking account with a debit card for your children so they can learn about balancing a checkbook. When they receive money as gifts, work with them to decide how much goes into checking and how much goes into savings.
They can use the money from the checking account to buy things that are outside of what you have budgeted for. If they have their own phone at this point, have them pay a portion of the bill themselves by check. l Ages 14-17. Put money in their checking account and let them shop for clothes and other necessities with that money.
This works well prior to school starting or in preparation for summer, and is a great way to teach budgeting and how to look for sales and coupons to make the most of their money. l Age 18 and up. It’s time for a credit card (with a low minimum), so you can explain how credit and interest work. If there’s a big-ticket item that they want (but don’t need), they can purchase it on the card and pay it off.