15 Ways to Teach Kids About Money

If you don’t teach your kids how to manage money, somebody else will. And that’s not a risk you want to take! We’ll show you how to give your kids the head start you wish you had and set them up to win with money at any age.

How to Teach Pre-Schoolers and Kindergartners About Money

1. Use a clear jar to save.

The piggy bank is a great idea, but it doesn’t give kids a visual. When you use a clear jar, they see the money growing. Yesterday, they had a dollar bill and five dimes. Today, they have a dollar bill, five dimes, and a quarter! Talk through this with them and make a big deal about it growing!

2. Set an example.

A study by the University of Cambridge found that money habits in children are formed by the time they’re 7 years old.⁽¹⁾ Little eyes are watching you. If you’re slapping down plastic every time you go out to dinner or the grocery store, they’ll eventually notice. Or if you and your spouse are arguing about money, they’ll notice that too. Set a healthy example for them and they’ll be much more likely to follow it when they get older.

3. Show them that stuff costs money.

You’ve got to do more than just say, “That pack of toy cars costs $5, son.” Help them grab a few dollars out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.

How to Teach Elementary Students and Middle Schoolers About Money

4. Show opportunity cost.

That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes.

5. Give commissions, not allowances.

Don’t just give your kids money for breathing. Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or mowing the grass. Dave and his daughter Rachel Cruze talk a lot about this system in their book, Smart Money Smart Kids. This concept helps your kids understand that money is earned—it’s not just given to them.

6. Avoid impulse buys.

“Mom, I just found this cute dress. It’s perfect and I love it! Can we buy it please?” Does this sound familiar? This age group really knows how to capitalize on the impulse buy—especially when it uses someone else’s money.

Instead of giving in, let your child know they can use their hard-earned commission to pay for it. But encourage your child to wait at least a day before they purchase anything over $15. It will likely still be there tomorrow, and they’ll be able to make that money decision with a level head the next day.

7. Stress the importance of giving.

Once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well.

How to Teach Teenagers About Money

8. Teach them contentment.

Your teen probably spends a good chunk of their time staring at a screen as they scroll through social media. And every second they’re online, they’re seeing the highlight reel of their friends, family and even total strangers! It’s the quickest way to bring on the comparison trap. You may hear things like:

“Dad, Mark’s parents bought him a brand-new car! How come I have to drive this 1993 Subaru?”

“Mom, this girl at school got to spend $10,000 on her Sweet 16 party. I want to do that too!”

Contentment starts in the heart. Let your teen know that their Subaru (although not the newest car on the block) is still running well enough to get them from point A to point B. And you can still throw a memorable, milestone birthday party without spending a chunk of your retirement savings funding it!

9. Give them the responsibility of a bank account.

By the time your kid’s a teenager, you should be able to set them up with a simple bank account if you’ve been doing some of the above along the way. This takes money management to the next level, and will (hopefully) prepare them for managing a much heftier account when they get older.

10. Get them saving for college.

There’s no time like the present to have your teen start saving for college. Do they plan on working a summer job? Perfect! Take a portion of that (or more) and toss it in a college savings account. Your teen will feel like they have skin in the game as they contribute toward their education.

11. Teach them to steer clear of student loans.

Before your teen ever applies to college, you need to sit down and have the talk—the “how are we going to pay for college” talk. Let your teen know that student loans aren’t an option to fund their education. Talk through all the alternatives out there, like going to community college, going to an in-state university, working part-time while in school, and applying for scholarships now.

While you’re at it, get The Graduate Survival Guide for them. It’s a must-have resource to help your college-bound teen prepare for the next big step in their life.

12. Teach them the danger of credit cards.

As soon as your kid turns 18, they’ll get hounded by credit card offers—especially once they’re in college. If you haven’t taught them why debt is a bad idea, they’ll become yet another credit card victim. Remember, it’s up to you to determine the right time you’ll teach them these principles.

13. Get them on a simple budget.

Since your teen is glued to their mobile device anyway, get them active on our simple budgeting app, EveryDollar. Now is the time to get your teen in the habit of budgeting their income—no matter how small It is. They should learn the importance of making a plan for their money while they’re still under your roof.

14. Introduce them to the magic of compound interest.

We know what you’re thinking. You can barely get your teen to brush their hair—how in the world are they supposed to become investment savvy? The earlier your teen can get started investing, the better. Compound interest is a magical thing! Introduce your teen to it at an early age, and they’ll get a head start on preparing for their future.

15. Help them figure out how to make money.

When you think about it, teenagers have plenty of free time—fall break, summer break, winter break, spring break. If your teen wants some money (and what teen doesn’t?), then help them find a job. Better yet, help them become an entrepreneur! These days, it’s easier than ever for your teen to start up their own business and turn a profit.

7 Secrets to Introduce Your Teen to the Power of Money

Believe it or not, teens are interested in money. Of course, they are interested in spending money, but many are interested learning about budgeting, managing and making money. Teens view learning about money as a symbol of independence and maturity. They view these vital discusses and lessons as the first steps to becoming responsible adults.

Over the past several years of teaching teens about the power of money, here are 10 tips to talking with your teen about money. Use these tips to help your teen to become a money smart teen.

#1: Don't talk down to your teen. The most important rule of thumb when introducing your teen to money is not to talk down to them. Treat them with respect and don't get frustrated when they don't fully understand what you are teaching them.

#2: Encourage your teen to ask questions. Encourage your teen ask questions and most importantly listen to the question. Teens offer a very unique insight to money and ask very insightful questions.

#3: Keep the tone of the conversation positive and light. When talking to your teen about money don't try to explain everything in one sitting. Also, don't get into the nitty-gritty. For example you wouldn't ask your teen to read all of the fine print on the back of mortgage application if wanted to teach them about mortgages. There is a time and place for everything.

#4: Bring up the subject of money while driving or walking together. One of the best ways to talk about any subject is while you are doing something else. For example, the next time you are driving with your teen to school, ask them about budgeting. Many teens will open up and talk more while walking or enjoy a bike, rather than sitting at the kitchen table.

#5: Let your teen know they can always turn to you for financial advice and guidance. Make sure your teen understands they can ask always talk to your about money. Encourage them to come to you with problems, questions, guidance, etc. about money.

#6: Don't judge your teen. Don't bring up past arguments, disagreements, mistakes or anything while you are in the learning environment. Your teen will quickly lose the willingness to learn if your dig up the dirt from the past. Forget them completely.

#7: Get your teen involved with the household budget. By this, I don't mean you should discuss every aspect of your finances with your teen, but you can allow them to work with you in a few areas. Here are few suggestions for you: help plan the family vacation, ask for their input regarding major family purchases (new car, new house, etc.), have them help with grocery shopping and ask them to compare prices with you.

Use these seven tips to introduce your teen to money and the power of money. By following these tips, you will be helping your teen to become a money smart teen.

Article Source: https://EzineArticles.com/expert/Andy_LaPointe/278174

Personal Finance for Children

I’m convinced that the best way to teach kids about money is to start introducing it to them young. Let them pay for things at the grocery store. Talk to them about why you make buying decisions. Explain where money comes from.

Giving Your Child an Income

Perhaps the best way to teach kids about money is to give them an opportunity to manage it themselves. Of course, you don’t have to hand over your check book and budget and tell them to pay the bills. Rather, give them opportunities to manage their own money. To manage their own money, however, your child needs a source of money, or an income. There are several ways to go about this.

Regular Allowance

A regular allowance is probably the most common way to give your child an income. The advantage of an allowance is that it closely resembles the regular paycheck that they will (hopefully) start getting when they hit the real world. On the other hand, parents may feel that giving a regular allowance teaches their kids to expect ‘something for nothing’. Perhaps you can stipulate that they only get their allowance if they do regular chores.

Fee For Service Allowance

But maybe you feel that regular chores are something the child shouldn’t need to be paid for. Consider giving them an opportunity to earn money by doing harder tasks that are above and beyond their regular chores. Let them know that they can always make job propositions to earn extra money.

Little Entrepreneurs

Another way for kids to earn money is by setting up their own businesses. Even 5-year-olds can do this with a lemonade stand. Older kids can mow lawns and scoop snow. But encourage your child to think outside the box. Why not retail? Warren Buffet famously sold gum and cola door to door as a kid (and look where he is now). Help them brainstorm things the people need or could use, and see if they can meet that need. Besides the money they’ll earn, or not earn, the entrepreneurial spirit that you’ll light and the lessons they’ll learn will benefit them for the rest of their lives.

Pick Up a Job

Older kids can always pick up a part time job. Even a few hours a week will earn the child enough money to start learning money management skills. For state specific rules on when kids can start working, check out the Department of Labor’s website, or talk to any local business.

Guiding Your Child’s Decisions

Once they have a source of income, give them suggestions on how to manage it. But remember, you’re trying to teach them to manage money- don’t manage it for them. Talk them through purchases. Suggest saving some of it. Also teach them of the importance of giving some of their money to good causes.

Teaching Through Consequences

Of course, when you give kids the opportunity to manage their money, they will not always make great choices. Sometimes they will make bad choices. This is part of the learning process. And this is why you teach them when they can afford to make mistakes. So let them make mistakes. Let them struggle. But also talk them through the consequences of their choices.

Your child may want to spend all her money on one thing. Before she makes the purchase, you might suggest that she reconsider and save some of her money. However, she may ignore your advice and make the purchase anyway. Later, she may want to buy something else, but doesn’t have the money to do so. Remind her that this is a consequence of spending her money earlier.

Or perhaps your child has followed your advice and does save a portion of his money. Maybe he saves his money week after week and month after month. Then on a family vacation he finds something memorable that he wants to spend his money on. Once you confirm that this is not going to be an impulse purchase he will regret, point out that he’s able to spend this money because he has saved so diligently.

Set Goals To Save Towards

It’s useful to have a goal to save towards. This puts the savings in perspective and gives motivation to save. As adults, we save towards goals such as retirement or a new car. Younger kids especially won’t be able to think so far ahead, so give them more age appropriate goals to save towards.

Perhaps you can teach them to save up to buy Christmas presents. Many kids will be thrilled to know that the presents they are giving are ones that they personally paid for. This is also a great opportunity to teach selflessness.

You could let them save towards a vacation fund. Let them know several months ahead of your next vacation that you will pay for certain expenses. Any extra is on them. If they end up not saving, as an added bonus, you’ll have an opportunity to teach them through natural consequences. And as a not-so-great-bonus, you get to use your creativity to come up with free activities to fill your vacation!

College savings is another goal you can have your child save towards. If you are not planning on paying for their higher education, talk to them about the possibility. Of course, this is only something that they will really start rationally thinking about when they get older, so you may decide to make some executive decisions when they are younger and save for them.

And of course, if your kid spots a big ticket item that they just really really need to have, point out that they can save up for it.

Moving Beyond Cash-only

At some point, kids need to learn money that isn’t ‘real’ is still real. In other words, they need to learn that non-tangible money is just important as the cash they can hold. A good place to start is by setting up a savings account for your child. And you may already have one set up, which is great! Let them see the monthly statements to show them how their balance is growing as they sock away money. Take them with you to the bank whenever you deposit or withdraw money, so they can see the exchange of physical cash.

Once you think they are ready, set them up with a checking account and debit card as well. Teach them how to record the transactions in a check registry, either on an excel sheet or in the registry provided. Point out that each purchase reduces the balance in the bank. Talk to them about things like overdraft fees and other fees that banks might charge.

Once your child has a firm grasp on banking and debit cards, you should at least introduce them to the concept of credit cards. Regardless of whether you personally use credit cards or think credit cards are good or bad, as soon as your child reaches adulthood, and especially if your child goes to college, he or she will be bombarded by credit card offers. These offers will come with some juicy perks, and I can guarantee that your child will at least be tempted to open a credit card.

If your child has not been introduced to credit cards and taught the right way to use them, they will likely make classic mistakes such as purchasing too much on the credit card and not being able to pay their bill in full, incurring interest. Or worse, not even being able to pay the minimum, incurring interest and fees, also while destroying their credit. For a great resource geared towards kids headed for college, check out this student credit card guide.

Teaching About Money Earning Money

As you teach your child about their bank account, point out the interest they are earning. Explain that the more they have in the bank account, the more interest they earn. Unfortunately, interest rates are so low currently that the best you’ll be able to find is 1%, so the interest earned isn’t going to be a very exciting amount. Nonetheless, it gets them thinking about the concept.

This may sound crazy, but I’m convinced you should also teach children about investments. A great place to start is with US savings bonds or with CDs from your bank. These will yield a little more than a savings account and don’t fluctuate in value like many other investments. US savings bonds also grow tax-free. Again, explain that their investment is earning them money just for being there.

The Stock Market?!?!

As your children get older, you can introduce them to the larger world of investing! Yes, you can open custodial investment accounts for your kids (do read this article on the implications of opening a custodial account). You can even start retirement accounts for your kids that are earning their own income (you are only allowed to contribute earned income).

Do tread carefully here- you can get burned in the stock market if you don’t treat it with respect. Start small. Explain that they should only invest money that they don’t plan on touching for a decade or more. Explain that the value of their investment will fluctuate. At times their account balance may be lower than the total amount they’ve invested. This can be disconcerting, but explain that dips in the stock market happen (sometimes huge, multi-year, dips), but that their investment will rebound, as long as they don’t pull their money out. This is why it’s a bad idea to obsessively check your investment balance- the current balance is irrelevant as long as you’re in for the long haul.

Why, Why, Why, Why, Why???

So given all the risks, why get your kids involved in the stock market at all? Because it’s simply the best way to keep ahead of inflation. Cash (both physical and in bank accounts), will see its value gradually eroded by inflation. So any long-term savings should be parked at least in long-term bonds, but better yet in the stocks.

Although it sounds crazy, starting your child in a retirement fund as soon as they start earning income is one of the best things you can do for them. Contributing regularly instills a great habit, and by starting early, you allow compound interest to do its job for that much longer.

Remember tho, the money that they put in the retirement account can not be taken out until they are 59 (my kid’s going to be 59 one day!?) without facing serious tax penalties. So any investments that they will want to withdraw prior to retirement needs to be invested in a regular account. Your kid might actually enjoy starting an investment fund dedicated to generating passive income from the dividends. Yes, you may be setting your kid up to be a money nerd.

But How Should They Invest?

There are thousands of brokers, and hundreds of thousands of possible investments out there. So where and how should you start them on investing? If you are up for DIY investing, I always will recommend investing in a Vanguard index mutual fund (and no, I do not get paid a dime for all my Vanguard recommendations). As a recap- an index mutual fund is a ‘basket’ of stocks that is designed to closely follow a section of the stock market. I recommend a mutual fund because it shields you from losing all your money in one or a few stocks going belly up. I recommend an index fund because it shields you from a fund manager’s bad decisions. And I recommend Vanguard because they have the lowest expense ratios (~0.1%).

If you aren’t up for investing on your own, don’t be afraid to go to a local financial adviser. Two things, however. Make sure that they sign a fiduciary agreement. This was set to be a legal requirement of them, but it looks like that rule is getting scrapped. A fiduciary agreement basically states that your adviser is acting in your (and your kid’s) best interests. Secondly, while their fees/expense ratios will naturally be higher (they need to put bread on the table too), if the annual total of fees and expense ratios is much higher than 2%, hold up a red card. Carl Richards has much more on what makes a great financial adviser.

If you set up a custodial account at Vanguard decide whether it will be a retirement account or traditional account. Once it is set up, make sure it is linked to your child’s checking account so that you can actually invest. You’ll get to pick what funds you want to invest in. If you’re investing for your child’s retirement (still sounds strange), opt for their Total Market Fund. If this isn’t a retirement account and your kid is crazy about starting a passive income (after all, who doesn’t want to earn money while they sleep), opt for their Dividend Appreciation Fund.

Daniel Palmar penniedollars.com