Essential Money Matters To Teach Your Kids

Posted on: 4th December 2013

Kids Saving MoneyHaving the right financial skills is necessary not only for survival in life but also in conquering it. Isn’t it a little bothering that schools don’t include teaching money matters to children? So if you are a parent, it is about time to take charge of that situation and educate your kids about these important lessons involving money.

Given the dismal mortgage crisis, student loan debt, credit card debt and other financial woes, it is a head-scratching moment how adults can navigate through their own personal and professional lives without always thinking about ending everything right there and then.

It doesn’t mean you should usher your kids into the harsh realities of life and spoil their short-lived innocence and lack of responsibility. But there are age-appropriate money lessons that you can already discuss with them little by little. The good thing about this is that, you as a parent or primary caregiver still has that big impact or influence in their attitude and behaviour, which includes their money handling strategies later in life.

Take a look at essential money matters for kids at each age milestone as well as the related activities to emphasize it.

3-5 Years Old

Essential money matter: If you want something, then you need to learn to wait before getting it.

Delaying gratification won’t kill your kids or scar them for life. Rather, it teaches them important values such as difference between want and need, patience, and the value of money itself.

A typical scenario would be in a grocery store. Most parents don’t want to shop with their kids because it would be the onset of World War III if they cannot get everything instantly. But actually, you have to take them to the supermarket (not all the time) so you can teach them that they cannot buy everything they want as soon as they spot an item.

Reinforcing Activities:

  • Give them a reasonable allowance. They cannot understand the simple concept of saving up if they do not have their own money at all. Teach them to distinguish among different bills and coins.
  • Create three jars labelled ‘Spending’, ‘Sharing’, and ‘Saving’. Explain how they are going to use it and why it is good to divide their allowance equally to each jar.
  • Let your kids set a specific goal for a period of time. It can be about buying a toy for Christmas or going to Disneyland for summer. But if the timeframe is too long, they might lose interest or get impatient about it. Make sure that it is reasonable for their age so they won’t end up frustrated about not getting it after a certain waiting period. Sometimes, it is just about waiting until the afternoon to buy some candy bars or stickers.

6-10 Years Old

Essential money matter: You have to think carefully on where you should spend your money on.

It is never too early to teach your kids that money does not grow on trees so that they would know that you have worked hard to provide them an allowance and all their other needs. Encourage them to make wise and informed choices about their spending preferences so they can really appreciate where the money would go.

Reinforcing Activities:

  • Let your kids participate in budgeting and other financial decisions of the family. It doesn’t have to be about which mortgage offer a lower interest rate for a specific span of years. It could be more on why you chose a particular brand of orange juice which is on sale but still has the same excellent taste as your usual orange juice.
  • Let your kids be involved in grocery shopping. Give them like $2 and encourage them to choose the fruits you want to have for dinner time.
  • Be transparent in your financial decisions. It is ok to let them hear you talking about whether your family really need to have a pet dog right now. Or you can ask their opinion about where to get a cheaper brand of milk or school stuff.

11-13 Years Old

Essential Money Matter: You could easily add up your money’s compound interest if you save it right now.

At this age milestone, your children can already understand the value of money, hard work, and saving for the future. Discuss with them the importance of planning short term, mid-term and long term financial goals.

Reinforcing Activities:

  • Show actual figures so your children can understand the concept of compound interests.
  • Do an online research together so you can see compound interest calculations. Have them read inspiring stories of successful business people. This could have a big impact on their future financial decisions.
  • Encourage your children to prioritize something more expensive or more valuable than their favourite food items or toys. This could give them the chance to work on – and eventually accomplish – long-term goals.

14-18 Years Old

Essential money matter: If you want to go to a specific university, make sure that you are realistic about its tuition fee.

It’s not just about the tuition fee but there are also other expenses like books, dorm fees, allowance, etc. But even if it seems too difficult to afford, your children should search for different options to be able to get a degree because it would always be a worthwhile investment.

Reinforcing Activities:

  • Discuss how much the family can contribute annually. It puts everything into perspective when you are honest and transparent about major financial decisions.
  • If the expenses are too high, your children can look into other colleges which can offer their desired course. If the university is non-negotiable, then your children must find ways to help the family raise enough money to support the education for four or more years.
  • Your children should have active participation in looking into financial aid or scholarship grants as well as its monthly loan payments so they can be more determined to study hard to finish their chosen degree.

18 Years Old and Above

Essential money matter: Use the credit card if you can make an on-time full payment of the balance within the succeeding months.

There are too many horror stories about sinking into credit card debt and your children should be fully aware of the detrimental and life-debilitating consequences of it. They should understand that their credit history would affect future financial decisions like getting a job or buying a home and a car.

Reinforcing Activities:

  • If you as a parent must be a co-signatory to a credit card application of your children, let them know that any late payment on their part would reflect badly on your credit history.
  • Encourage them to make a wise decision about the credit card company they are going to patronize, preferably something that has no annual fees and has low interest rates.
  • Make them understand that they cannot use credit card for all their expenses. They have to control their credit card usage so it can be available for emergency situations.

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