Give Your Kids an Edge* – Teach Them About Money Early In Life
I believe that a major cause for the financial problems that many Americans face is directly tied to a lack of money-related education earlier in life. If you set a good example and start educating them early, you will give your children a significant advantage when they begin their lives in the real world.
Not only do I want to help my now-4-year-old son make good financial decisions to improve his quality of life, but this knowledge may someday protect the financial lifestyle that my wife and I want for to have for ourselves. No doubt there are countless examples of situations where parents’ finances have been significantly impacted by the poor decisions that their kids make.
The following outlines my plan to educate my son and pass along some important lessons about money. I invite any comments from those experienced parents and grandparents on any other useful tips you have found.
Age 3-5:
At this age, I just want him to be aware of what money is and what it’s used for. The first rule: Don’t eat the money (never underestimate a young man’s curiosity). Around the age of 3, I dumped some change on the floor and let him have fun sorting the money into sizes and colors (again, supervised to avoid monetary ingestion).
I also have begun to introduce the use of money by letting him put coins into a vending machine or hand money to a cashier at the store.
Age 6-10:
By now, he should understand the differences in the value between coins and bills and other simple money-related concepts. He will learn some basics in school, so I may not have to do much in this area, but I will verify that he understands it. He should also begin to understand what things cost (e.g. a TV is more expensive than a hamburger).
Starting with this age range, I will introduce an allowance. I believe an allowance is a good method to teach kids about spending and saving. It will be his money and his decisions about how to use it. I will let him make mistakes so that he learns from them.
There is debate about whether an allowance should be earned or given freely without condition. I don’t think there is a right answer or a wrong answer here. Personally, I am not going to tie chores to his allowance. I feel that it will be his family responsibility to clean his room or help with dishes, and not a requirement to get paid each week. I see this “give-away” as a good investment. If you go to a ballgame and they want to buy one of those big finger gloves, let them – as long as they use their own money. They want a new bike? Sure, if they put in half (doubt they will want the most expensive one now). This not only helps them; it helps you save money.
In order to help make the work/pay connection, at this age I will start giving him simple projects to help around the house for extra money (raking leaves, cleaning windows, etc).
For supplementary information about teaching money concepts to kids, please take a look at the following sites:
The next age group (11-18) is a big topic. That blog post is coming soon.
As always, if you have any comments or ideas on what has worked for you, please post them – they are greatly appreciated.
Originally posted by Kevin Jaegers, Senior Investment Adviser
Edited and updated by Carolyn Humpherson, Financial Communication Specialist
*Please note that this blog posting is a slightly modified version of a blog entry originally posted in September 2008. We call our re-posted blog program Second Chance: Blog Posts Worth Re-reading, and we only include our favorite posts.
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