As a parent in the 21st century, you probably understand by now that it’s important to teach your kids how to handle their personal finances.
You’ve heard the statistics over and over again. Students are graduating high school with little or no knowledge of financial literacy. According to a Forbes article, 40 percent of young adults are going into debt funding their social lives while 70 percent are damaging their credit ratings shortly after college graduation.
So you get it – schools aren’t teaching our kids the financial literacy skills hey need to navigate the real world. That means it’sup to the parents. Great.
But where do you start? Should you be talking to your firs tgrader about consolidating credit cards? Can a 16-year-old understand the importance of long-term saving?
How can you explain financial concepts to your children early enough to have them stick without completely confusing them?
Here’s a nifty guide of appropriate financial conversations to have with children broken down by age. Happy teaching!
Toddlers and Kindergarteners: You’d be surprised how early you can begin teaching the basics of money. By age 4, most toddlers understand that consumers need money to buy things – and that makes it the perfect time to start teaching money basics. Show your child coins and dollar bills and explain what they’re all worth. Give your kids currency to count and hold on to from time to time. Use real money at stores and let your kids help count it out before a purchase.
Early elementary years (ages 6 – 8): By early elementary school, most children already have a grasp of the basic mechanics of finance. They’ve also begun to understand the concept of delayed gratification. It’s time to start learning about saving.Have your children think about a toy or purchase they’d like. Give them a small allowance or payment for chores around the house and give them the option to save the money toward the toy they want. Try to make this saving period take weeks – not months. Your kids don’t quite have the patience for long-term savings, yet.
Late elementary years (ages 9-11): By this point, your children have begun learning how to make decisions. They decide who they want to form friendships with, whether to do their homework and what to throw on before school. So it’s a good age to start talking about making informed financial decisions. Have your kids comparison shop with you when you’re out. Teach them to look at the price labels, the size and the quality of the item before purchase. Also teach them to ask questions like, “Do we need this item?” It might also be a good age to start teaching children about how credit cards work.
Middle school years (ages 12-13) – It’s time to teach your children how to budget. Give your child an allowance or money for chores completed around the house and ask him or her to write down how much they’re given and what they spend it on so they know where it goes. Once they’ve spent all their money, don’t give them more and don’t by them luxuries like games and frivolous clothes. Let them know that once that “fun money” is gone, it’s gone. They’ll need to budget to make it stretch further.
High school years (ages 14-17) – By high school, teens are ready to learn how the economy influences their personal finance. They should begin learning about interest rates and the value of compound interest. They should also begin to understand annual percentage rates and why rates fluctuate based on changes in the market.