Whether or not your child's idea of
a fun toy is a cash register and fake coins, the fact remains that as a parent,
it's your job to talk about financial responsibility with your kid.
But how young is too young to talk
about budgeting or, say, credit reports? After all, we don't want them to grow
up and start hiding money under their futons.
We tapped Erica Sandberg, national
personal finance expert and author of Expecting Money: The Essential
Financial Plan for New and Growing Families, to help us lay out money
milestones for every age.
Age 3: Practice Waiting
At this age, kids should be learning
about patience, and how to respond when they don't get something they want
right away. The simple lesson of delayed gratification will benefit them for
the rest of their lives.
Activity: Tell your toddler that you'll give him a cookie now if he
wants it, but you'll give him two cookies if he waits an extra ten minutes. See
what he chooses and try to encourage him to wait for the extra cookie.
Lesson Learned: Be patient and wait for a bigger payoff, rather than always
going for instant gratification.
Age
4: Go Over Counting
Your kid won't understand the
finances behind money at this age, but he should be good at counting and basic
addition. So, this is the year to start linking those budding math skills to
the concept of money.
Activity: Give your child a mix of coins and have her start by
counting how many there are. Each week, introduce a new coin with its name
("this is called a quarter") and have her practice picking it out of
a pile. Once she's learned all of the coin names, have her separate
the pile into all of the different types, and keep growing the pile each week
to escalate the challenge.
Lesson Learned: The names and sizes of each coin (plus math practice).
Age
5: Associate "No" With Spending
Kindergarten is when peer pressure
starts to rear its ugly head, so stop the peer-inspired begging for stuff
("but Tommy has one!") before it even starts.
Activity: Tell your kid that you can't buy everything you want, so
you have to choose the items that are most important to you. The next time your
kid sees two things he wants at the store, make him choose just one. It can be
just as hard for moms to say no as it is for kids to hear it.
Lesson Learned: It costs money to buy things, so you can't always get
everything you want.
Age
6: Start Giving Allowance
This is the year of "make it
work." Many experts advise starting kids with an allowance around age six,
which means that if they want something just for fun, it's up to them to save
and figure out how they'll get it.
Activity: Start giving your child an allowance on a weekly basis. The
exact amount will vary depending on your situation and personal history, but a
rule of thumb is a dollar per year of age, so you might want to start your kid
with about $6 a week. Note that some experts say allowance shouldn't be tied to
chores: It's a tool to teach your kid about managing money, not to pay her for
household duties she should be doing anyway. Get answers to any other allowance
questions you might have at LearnVest.com (see Resources below).
Lesson Learned: If you want something, figure out how much it will cost and
save up.
Age
7: "What Do You Want to Be When You Grow Up?"
This is about the age when teachers
start to ask kids what they want to be when they grow up. That makes this a
good time to talk to your child about career and work. You should cover the
fact that, though you go to work to earn money, if you're lucky, you also enjoy
it. Try to instill positive feelings toward work and earning an income.
Activity: Ask your kid what he wants to be someday, and have him draw
a picture representing his dream job. Do this activity with him, sketching out
a picture of you and your job (it doesn't need to be artistic). Explain what
you do at work, why you chose that field and why you like it.
Lesson Learned: People work to make money, but they should try to choose
their jobs based on what they enjoy.
Age
8: Show What Household Things Cost
By this age, your kid's
understanding of addition and subtraction should be advanced enough that she
can easily understand the broad concept of money coming in and going out. So,
this is a good age to explain that, although you make money at work, you have
to spend some of it on bills.
Activity: From now on, let your child sit next to you while you pay
the bills. These numbers -- especially rent or mortgage -- will be too big for
her to thoroughly comprehend, but you can let her help you with some of the math
operations to balance your checkbook, like adding up the cents column in your
transaction ledger.
Lesson Learned: Adults have to pay bills, but that's not a problem as long
as they save up money from their paychecks.
Age
9: Open a Savings Account
By age 9, kids are old enough (and
self-possessed enough) to understand the concept of saving money for items they
need and want. This is the right age not only to set up a savings account but
also to include your kid in the action so he feels ownership over it.
Activity: Open a custodial savings account with about $30 (see
Resources below), and tell him you've done so. Don't let him withdraw money at
will -- if he wants to save up for a big purchase like a bike, he should talk
to you about it -- but tell him that you'll take him to the bank to make
deposits whenever he wants. For every dollar he contributes, consider offering
to match it
Lesson Learned: It's fun to save money!
Age 10: Teach the Truth
About Cards
By the time your kid is in late elementary
school, she'll almost certainly hear people mention credit cards.
Before she takes in misinformation or bad habits from her peers, teach her
constructive (and correct) information about the different kinds of cards and
accounts people have.
Activity: Take all of your cards out of your wallet and go over which
one is for debit, which is for credit, etc. Explain the differences between
them. Then, when you're at the grocery store, let her swipe your card for you.
Point out what that means for your money: If it's a debit card, she's deducting
money from your checking account. If it's a credit card, you might want to say
something like, "Swiping this equals borrowing money from the company that
gave it to me -- if I don't pay it back on time, they'll charge me extra, but I
always pay it back on time!"
Lesson Learned: How debit and credit cards work, and the importance of
always paying back credit cards in full and on time.
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