Saving money continues to be a priority for my family. In fact, our family of five routinely hits our monthly budget by reining in our eating out.
We’re big on road trips to save airfare (even long hauls from South Texas to Chicago). But between school and intramurals, it’s tough to work in lessons on financial literacy for our children.
Teaching our kids about money is a multi-year journey, not a final destination. I worry that, in a cashless era of instant gratification, ideas about smart saving and spending get lost on our school-age boys. Piggy banks get passed over for video game credits. Birthday gift cards make it easy for our kids to get what they want and hard for us to demonstrate the traditional wisdom of “saving our pennies.”
And as the kids continue to grow, lessons on how to save and how to responsibly manage money remains critically important.
We gave each boy a savings account at 10 years old. And for the longest time, only our oldest son deposited his allowance instead of spending it right away. Hopefully, this will change, and as parents we know that it’s up to us to find ways to reinforce the lessons.
As they age, we constantly wonder what we can we do better. How can we change our approach to teaching the kids about money as they continue to grow?
Personal Finance for Kids
Some parents balk at talking about money with their kids―as if it’s taboo. Others worry about sharing details or burdening kids with financial worries. Elaine King, a certified financial planner and founder of Family and Money Matters, says that money-related lessons are as essential as those on emotional intelligence, nutrition and spirituality. “As parents, the purpose is not to make kids happy, but to give them the tools they need to make themselves successful,” she says.
My husband and I are still focused on helping our kids master financial skills. Here’s a look at age-by-age guidance that can help all of us.
Younger Than 5 Years Old
Money is an abstract concept, so don’t expect your youngest to grasp complex money-related ideas. Start simply with these 4 basic ideas:
• Delayed gratification
• Understanding the concept of saving on a base level
• Placing value on their belongings and hard work
• Beginning to conceptualize the value of coins
Here are some ways to use each basic idea to begin teaching children about money:
1. Delayed Gratification. Use kid-friendly examples, King advises, such as, “We’re not gonna buy two ice creams today because tomorrow we’ll buy you a toy.” This is an easy way to show that experiences can be saved.
2. The Idea Of Saving. Today and tomorrow until around ages three or four, King says, so be patient. Start conversations about saving with storybooks such as Alexander, Who Used to Be Rich Last Sunday, a classic about spending $1 too fast.
3. The Value of Things and Work. As children put away toys, talk about taking care of them to seed the idea of replacement costs. Try to fix broken items, and don’t rush to get new ones if the old ones are fine. Steve Economides, who runs MoneySmartFamily.com with his wife Annette, had their youngest child, at age three, do simple tasks like dragging the laundry basket. Starting early can help assign value to even small jobs.
4. The Worth of Coins. Looking at a concrete object and assigning it an abstract value is a big leap. Economides helped his youngest by assigning each coin “points” as he puts it in her piggy bank. “This is a nickel, and it’s worth five,” he might say.
5–10 Years Old
By second or third grade, kids have the math skills to make real progress, according to the Child Mind Institute. Then they can better understand saving toward a goal. “They may become good savers, but they need to save for something,” King says. “Help them understand that money is also for planning, growing and sharing.”
There are many ways to introduce your school-age children to money management, as well as to incorporate learnings in daily life:
● Everyday Scenarios. Use the grocery store as a classroom, King says. Give kids $20 to buy fruit, for example, and tally the cost of items as they go into the cart. Quiz children on the price of items, such as a gallon of milk. (My nine-year-old guessed $2.45—about a dollar off!)
● Spending and Saving Plans for Kids. Economides’ system divides an allowance among three envelopes:
1. Giving (10%)
2. Saving (20%)
3. Spending (70%)
Allocation ideas may differ, but creating a plan for how kids spend translates to a lifelong skill.
● Upping Financial Expectations. Methods for doling out an allowance abound, but establish one and stick with it. “The way kids learn the value of money is learning to earn it,” King says. That means you can slowly raise the requirements for the chore chart—and raise the corresponding allowance amount.
● Money Talk. If kids don’t want to listen, keep trying. Let them overhear discussions about the family budget. “We didn’t talk about how much we earned. We talked about the things we spent money on,” Economides says.
● Long-Term Financial Goals. Involve kids in projects like saving for Disney day passes or a holiday charity gift.
11–15 Years Old
Tweens and teens can hone their financial IQ, and this is when entrepreneurial tendencies blossom, King says. Denise Warshak of San Antonio helped daughter Emma, now 15, start a cupcake business and ticked off lessons Emma has learned: time management, the value of her time and the concept of profit and loss. “She’s not a big spender, so we’ve taught her to save and even invest,” Warshak says. In addition to business sense, foster other aspects of money sense.
● Family Budget Details. Share what you’re comfortable with, from car payments to mortgage costs, so kids learn what costs to expect in the real world.
● Savvy Shopping. Teens get a kick out of savings on Black Friday, Prime Day and Cyber Monday. The Economides kids even stretch their clothing allowance at thrift stores, consignment shops and garage sales.
● Banking Skills. A joint bank account gives you a chance to explore the topics of saving and interest and to practice online banking skills.
15–20 Years Old
The goal is to equip kids for life on their own, yet 75% of high school grads are ill-equipped to make critical financial decisions, according to Money Experience, a financial education company that targets Gen Z. Founder and CEO Jeet Singh encourages teens to think about long-term goals, like the quality of life they want and how to achieve it.
● Goal Setting. Singh encourages goal-related conversations about money and says it helps if parents share their financial experience: “[G]ood decisions you’ve made, or bad ones.”
● Part-Time Jobs. Juggling homework, extracurriculars and a part-time job is possible. “Doing more, requiring more doesn’t hurt [teens], as long as it’s balanced,” says Economides. A first boss, a first paycheck and filing taxes make invaluable real-world lessons.
● Understanding Credit. Explain how credit works. Open a joint credit card so you can keep tabs. Or try a prepaid card. Share lessons learned about managing credit cards responsibly.
The Ultimate Goal: Financially Responsible Kids
All this advice can produce kids who manage money well as adults. Once I had my first full-time job after college, my mom called to let me know that I’d now be paying for car insurance. I was ready. I’m using this financial guide with my boys so that they’ll be ready for that kind of phone call, too.
Jennifer Chappell Smith lives with her husband in San Antonio, working as an editor and writer and mothering three boys, ages 11, 9 and 8.
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