Age appropriate money lessons
Posted on August 18th, 2008 – 2:45 PMBy Kara McGuire
Here’s a handy list of age-appropriate money lessons for kids courtesy of Kiplinger Personal Finance editor Janet Bodnar:
Ages 3-5: Big-Picture Years. Keep things simple and don’t expect too much. Encourage kids to put coins in a vending machine or pay the ice-cream man. They can play with fun savings banks, learn the difference between pennies, nickels and dimes, or collect state quarters. The more hands-on the activity, the better.
Ages 6-7: Time to Start an Allowance. How much to give? Start with a basic weekly allowance equal to half the child’s age. Tie the allowance to “financial chores”—spending responsibilities that the kids take over from you. To make the connection between work and pay, give your children the opportunity to earn money by doing extra jobs such as vacuuming or raking leaves.
Ages 8-10: Bank on It. Help your kids open their own savings account. Should you require your kids to save? Not necessarily—but you can have them divvy up their allowance into pots of money for spending, saving, charitable giving, even investing. Have your children save toward a goal, whether it’s a toy or a new baseball glove. And you can always encourage kids to save by matching what they put aside for your very own family 401(k).
Ages 11-13: Parent Power. As you head into the difficult ‘tween years, remember that parents have power. Kids will listen to you if you have a clear message and deliver it consistently. Expand their allowance money to include more discretionary purchases such as video games and movie tickets. Kids shouldn’t hit you up for 20 bucks every time they head to the mall. Having to chip in their own money puts a natural brake on spending. If you’re an investor, introduce them to the stock market with small purchases of stock through sites such as www.ShareBuilder.comwww.MyStockDirect.com.
Ages 14-15: Stick With Cash.Parents should decline prepaid debit cards which banks aim squarely at this age group. Stick with cash. Even at this age, plastic of any kind isn’t as real to kids as money they can see and feel. Expand their allowance to include clothing, concerts and other high-school entertainment. Encourage them to get a job—at least over the summer.
Ages 16-18 and Into College: Hold the Plastic. Teens don’t realize that a credit card is not free money. They need to know that when you use a card, you’re borrowing from the card issuer, which will charge you a high rate of interest. Cash is still king. Help your kids open a checking account (and get a debit card) so they can learn how to balance a checkbook—either by using a check register or online entry—before they head off to college.
Parents, what do you think of this list? Are the age ranges spot on in your opinion? My daughter is approaching 5 and we tried to initiate an allowance, but she routinely gets the $1 and leaves it on the floor or says she doesn’t want it right now. I don’t think money has much meaning to her yet.
What has worked well for me is discussing wants and needs. I wrote a column about how quickly Charlotte picked up that concept for Minnesota Parent.
4 Responses to "Age appropriate money lessons"
“Ages 16-18 and Into College: Hold the Plastic. Teens don’t realize that a credit card is not free money. They need to know that when you use a card, you’re borrowing from the card issuer, which will charge you a high rate of interest.”
This is the one age guideline I strongly disagree with. When is the teen going to realize this concept then, once he or she is off at college being bombarded with credit card offers? Not every kid is financially incompetent at this age. I opened a low-limit ($500) credit card at 16 with a parent as a co-signer, and seven years later I have never paid a dollar in interest and a have a substantial credit rating for someone my age due to the fact that I have a credit history.
OK so I’m not a parent yet, but just wanted to comment in relation to my own financial upbringing (I’m now 24). I disagree with the suggestion for ages 16-18, in some respect. I had a credit card when I was 16, and my dad was on the account with me. I learned at a very early age what a credit card does, and I NEVER carried a balance or paid any interest. Instead, I established a good credit score, which is very important, even at my age. I now use credit cards to pay all my expenses, but I always pay them off each month. You just have to lead by example — if you’re using credit cards irresponsibly, your kids will too (or hopefully learn from your mistakes, I guess).
I would add to the younger years, once they start getting an allowance, to also have them track their spending. Not exactly like balancing a checkbook but good to see how much $ they start out with in the week and where it is spent. We grew up with “Cash books” a ledger of our spending, $50 at the swimming pool for a treat, $2 for a movie etc. The cash book had to balance before we got next week’s allowance. Taught me to be honest with how I was spending my money, showed me that if I saved I could make larger purchases and I learned why balancing the book was important.
With my oldest not quite 5, I’m going to print those out and save them as general guidelines. We’ve kept it simple so far and discussed the wants vs. needs.
I’ll agree with the notes about credit cards and teens, though - most important is not age, but leading by example. I didn’t get my first until I was in college but my parents never carried a balance and made sure I knew that. Lack of a credit history was only a problem once, and after a co-sign on a single loan, that never came up again.
But remember, some of this advice is geared toward the “less financial savvy”, pretty much everyone who doesn’t read this blog! (massive overgeneralization, but you get the point). Many of those teens out there really DON’T realize it’s not free money…sad but true. I like the idea of starting with a debit card first before moving into credit cards.
