How to Actually Teach Kids the Value Of Money Based on Their Age
Finances can seem like a big topic that isn't age-appropriate to talk about with kids. Although some parents might think that they are doing their kids a favor by shielding them from the scary, complicated, and intimidating world of economics until their child is older, they are actually doing their kids a disservice if they don't get them involved from a young age. According to the Consumer Protection Bureau and the President's Advisory Council on Financial Capability, you can begin building a strong financial foundation starting from the time your child goes to preschool. It's also important to continue introducing essential concepts that are fitting as they get older in order to raise financially responsible adults.
Instead of avoiding the topic, scroll through for a list of digestible yet essential principles that your child should master based on their school year.
:upscale()/ps-image-unavailable.png)
Preschool
Your child isn't going to become a financial genius overnight, and at this age you are just going to work on basic aspects of finances that coincide with what they are learning in school, like their numbers. But in order to start introducing them to the concept of money, that everything has a cost, and that funds aren't unlimited, you should start teaching them:
- The concept of a piggy bank to keep money in order to save it.
- The idea that you need money in order to make purchases and sometimes you have to wait to earn it.
- How to identify different bills and coins.
- The importance of practicing their numbers (and they can even start reading prices while shopping!).
- Identifying the difference between their wants and needs so they learn how to prioritize when you can't always buy everything.
- The difference between big and little purchases — and that cost isn't the same as size.
- How to show gratitude for the gifts they receive.
Elementary School
At this stage, kids are familiar with money and having to pay for what they want, even if they don't understand at this point the value of a dollar. In order to increase their financial awareness and foster positive growth as far as financial awareness is concerned, this is what children in elementary school should be working on:
- How to make change with both coins and bills.
- How to use money and come up with the same amount using different bills and coins.
- How many of each coin is in a dollar.
- How to compare prices when shopping.
- How to shop within a budget. For example, setting a certain limit for a dinner and having kids help find groceries that work within it.
- The concept of their allowance and that they have to work for it.
- Opening and contributing to a savings account on a regular basis even if it's just a few dollars per deposit.
- Understanding that they gain interest on and protection on money they put in the bank.
Middle School
At this point, not only is your little one probably more vocal about their wants (that they are convinced are needs), but also those desires are most likely even more expensive. This is an important time for kids to learn about working for the things they want, developing patience while saving, and making smart financial choices for their long-term goals. To get this age group thinking critically about money, you should focus on getting them to:
- Start volunteering for odd jobs to earn extra money and not just expect to get paid an allowance without completing tasks.
- Understand that you should never share your credit card number, PIN, or financial information with others.
- Start understanding principles of basic economics and a consumer market.
- Realize how their financial decisions impact long-term and short-term goals (like if they buy that candy now, they are going to have to work longer to pay for the video game you really want).
- Appreciate that there are people less fortunate and the concept of making donations and being charitable.
- Realize that if you spend more than you have on a credit card, you will have to pay interest on it.
High School
These are the years when your child becomes more financially independent and lay the groundwork for how they are going to handle their money as an adult. Instead of continuing to allow your child to completely depend on you financially at this stage, it's essential that you encourage your teen to take some responsibility while they are still under your guidance to help with any mistakes. No matter how good or bad your personal finances are, these are the things you should make your kid do:
- Get a part-time job for a steady income and the opportunity to learn some financial independence.
- Understand what taxes are taken out of their paychecks and why this occurs.
- Do charity work because time is money and they should donate both when they can for those in need.
- Get their first debit card and learn how to manage funds (and deal with overdraft consequences).
- Take an active roll in understanding the cost of different colleges as far as tuition, room and board, books, and meal plans.
- Be exposed to the different ways of investing money.
Going Off to College
Certain financial decisions that they make can impact them for many years to come at this point in their lives. From not understanding the student loans they opt for to incorrectly using their credit cards with high interest rates, college is an important time for your kid's financial future. To set them up for success, ensure they know:
- Exactly how credit cards work (including the monthly payments and interest rates) as well as the differences between cards.
- The different types of student loans, which they have if they took out any, and what the pros and cons are for them.
- What a credit score is, what it is used for, and what impacts it.
- What a 401(k) is and why they should care about it.