Helping Children Learn Good Money Habits
My son Archer (almost 11) is a typical middle child; stubborn and independent. He doesn’t mind chores, as long as there is something in it for him. He is good at math, but until recently was never much of a saver. He spent his allowance, birthday, and Christmas money as fast as he collected it. So I was a bit surprised when he came to me a while ago and asked if I would open a bank account for him, “so Mom can pay me half my allowance in cash and you can put the other half in the bank”. As a financial planner, it almost brought a tear to my eye. --Maybe he was actually listening all that time, and is more like me than we thought. It reminded me what else we could be doing to help him develop good money skills now and avoid financial trouble later in life. Following are a few suggestions to help get your kids off to a positive start.
Pre-school age:
• Make money real. Pay them an allowance for simple chores so they begin to equate work with pay.
• Use a piggy bank and teach them how to identify and count coins
• Have them put money in a vending machine to get something out. Talk about money as you go about your day so they start to make connections between what things cost a little or a lot. Help them save for something and talk about the satisfaction of buying it themselves
Elementary and Middle School
• Set up an allowance. Let them learn to manage their own money and make choices about what they will do with it. Provide a fixed allowance and make them responsible for certain activities, i.e spending money at the pool, or trips to the arcade. This will help them learn to budget and prioritize wants and needs. Allow them to feel the consequences of poor spending decisions.
• Help them set a savings goal, and think in terms of cash in their pocket -short term savings, cash in the bank -long term savings for major purchases, and giving some to charity.
• Help them open a savings account. Archer and I made an event of going to the bank to open the account, and other than providing his social security number, I made him do all the talking to the branch manager. She did a nice job of quizzing him on what he would be saving up to purchase. He had a months worth of allowance in his pocket (denominated in crumpled up $1 bills of course), which I matched to get him off to a good start.
• Discuss money matters but check your emotions at the door and discuss spending in neutral terms. Help them understand sacrificing in the near term to help meet linger term objectives. --We passed up Spring Break vacations for two years, but saved up and went to Disney last year. And even then, it took a while for the kids to understand why a major vacation like that is not generally an annual trip!
High School
• Let them experience a little of the real world. Ask them to track a monthly household bill, and offer to split the savings with them if they can get it down over time so they learn the consequences of leaving the lights on all day. Better yet, if they have a cell phone, have them pay for their own usage.
• Have them open a checking account. Teach them to track expenses and balance regularly. It is especially helpful as they start their first part time jobs. They can deposit money and use an ATM/Debit card to learn how to manage their finances. You can monitor their progress via online banking, along with your own accounts.
• Discuss the appropriate use of credit cards and other types of loans.
• Stop giving your child an allowance. By age 16, kids should start to become responsible for their own spending. Instead of an allowance, you can consider giving them a clothing allowance 3-4 times per year so they can purchase needed items themselves and you can help them budget their money to cover things they want.
• Help older kids invest in a mutual fund with a portion of their savings
College and Beyond
• Make them responsible for their own money. If you want to help with spending money when they go to college, put a set amount in their checking or savings account and let them know it is not an arbitrary number
• Require them to get a summer job to help with expenses next semester, and make them responsible for some of their own expenses, i.e. books, supplies, etc.
• Monitor their spending with online banking to help them stick to a budget and provide help if needed
• Offer advice on Credit. Discuss the potential pitfalls and make sure they monitor their credit score once they do take out a loan. This will teach them the type of information creditors consider and the importance of maintaining good credit.
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Pre-school age:
• Make money real. Pay them an allowance for simple chores so they begin to equate work with pay.
• Use a piggy bank and teach them how to identify and count coins
• Have them put money in a vending machine to get something out. Talk about money as you go about your day so they start to make connections between what things cost a little or a lot. Help them save for something and talk about the satisfaction of buying it themselves
Elementary and Middle School
• Set up an allowance. Let them learn to manage their own money and make choices about what they will do with it. Provide a fixed allowance and make them responsible for certain activities, i.e spending money at the pool, or trips to the arcade. This will help them learn to budget and prioritize wants and needs. Allow them to feel the consequences of poor spending decisions.
• Help them set a savings goal, and think in terms of cash in their pocket -short term savings, cash in the bank -long term savings for major purchases, and giving some to charity.
• Help them open a savings account. Archer and I made an event of going to the bank to open the account, and other than providing his social security number, I made him do all the talking to the branch manager. She did a nice job of quizzing him on what he would be saving up to purchase. He had a months worth of allowance in his pocket (denominated in crumpled up $1 bills of course), which I matched to get him off to a good start.
• Discuss money matters but check your emotions at the door and discuss spending in neutral terms. Help them understand sacrificing in the near term to help meet linger term objectives. --We passed up Spring Break vacations for two years, but saved up and went to Disney last year. And even then, it took a while for the kids to understand why a major vacation like that is not generally an annual trip!
High School
• Let them experience a little of the real world. Ask them to track a monthly household bill, and offer to split the savings with them if they can get it down over time so they learn the consequences of leaving the lights on all day. Better yet, if they have a cell phone, have them pay for their own usage.
• Have them open a checking account. Teach them to track expenses and balance regularly. It is especially helpful as they start their first part time jobs. They can deposit money and use an ATM/Debit card to learn how to manage their finances. You can monitor their progress via online banking, along with your own accounts.
• Discuss the appropriate use of credit cards and other types of loans.
• Stop giving your child an allowance. By age 16, kids should start to become responsible for their own spending. Instead of an allowance, you can consider giving them a clothing allowance 3-4 times per year so they can purchase needed items themselves and you can help them budget their money to cover things they want.
• Help older kids invest in a mutual fund with a portion of their savings
College and Beyond
• Make them responsible for their own money. If you want to help with spending money when they go to college, put a set amount in their checking or savings account and let them know it is not an arbitrary number
• Require them to get a summer job to help with expenses next semester, and make them responsible for some of their own expenses, i.e. books, supplies, etc.
• Monitor their spending with online banking to help them stick to a budget and provide help if needed
• Offer advice on Credit. Discuss the potential pitfalls and make sure they monitor their credit score once they do take out a loan. This will teach them the type of information creditors consider and the importance of maintaining good credit.
Return to News Home