If you want your children to grow up to be good money managers, remember that they’re most likely to do as you do rather than as you say.
“The most important thing is that parents set a good example with their own money and finances,” says Elisabeth Donati, founder and executive director of Creative Wealth International (formerly Money Camp), a nonprofit organization that offers financial wisdom to kids and adults. To do that, she suggests, parents must thoroughly examine what they say about money and, more importantly, how they act with money.
As early as preschool, kids can learn to understand the value of money by being shown how to tell different coins apart and even being allowed to pay for items on family shopping outings.
Piggy banks can provide an early lesson in saving. As children reach age 6 or 7, it’s important to involve them more extensively in your family’s financial life, says Donati, talking to them about expenses, credit cards, debt, paying bills and other money matters. Even something as simple as taking money out of an ATM can offer an opportunity to talk about where money comes from.
Middle school years
By middle school, advise many experts, kids should be receiving a weekly allowance that allows them to cover most of their own expenses including lunches, clothing and entertainment.
Making mistakes at this age—for example, coming up short on lunch money after splurging on a trendy new shirt—is far less painful than it will be when they’re older. Let them rectify their budget miscalculations through extra chores around the house, running a lemonade stand or leaf-raking business, or possibly borrowing from Bank Mom (at a reasonable interest rate).
Children in this age group can also benefit from having a savings account in their own name.
With financial independence (ideally) looming on the horizon, now is the time to be clear about who pays for what. In their early teens, kids can open a checking account and learn how to balance it, and they can join in family financial discussions, including how to save more and cut expenses.
Older teens can earn their own spending money with an outside job, do household shopping on their own, and help plan and budget for family vacations or other big-ticket items.