Tips for Teaching Your Kids About Money

Dear Readers: Moms these days can fill a lot of roles—from nutritionist to chauffeur to nurse to counselor. We’re called on to be experts in everything from caring for physical wounds to healing broken hearts. On top of that, many of us hold down full-time jobs! Now I’m going to add one more responsibility to the list: financial coach. Think you don’t have time to add one more thing to your busy schedule?

Actually, you might be surprised at how much financial knowledge you already impart to your kids just in the everyday things you do. After all, kids are always watching and learning from us—even when we’re unaware of it. So my thought is that when it comes to money, a little conscious awareness on the parts of moms—and dads—can make the financial lessons we teach our kids that much more effective.

Still skeptical? Here are some practical ways you can increase your kids’ financial knowledge from the early years until they’re ready to set off on their own.

Early Years

I’m all for starting to teach kids about money at an early age. I believe even children as young as 3 to 5 can begin to learn a bit about saving and spending—and have fun doing it. As your kids get older, you can involve them in budgeting, smart credit management, even investing. And it doesn’t have to take a lot of time.

Instilling the savings habit in kids from a young age is a great start to their financial education. Add to that a beginning awareness of spending, and you’ll really give them a boost. Try these simple activities to get started:

• Have your kids choose something they really want. Put a price tag on it, and help them set aside a portion of any money they get from an allowance or gift, say 10 percent, toward their savings goal. That’s a good start. (You can always match their savings to help them along!)
• Make saving tangible for even the youngest children by decorating separate jars for each savings goal and helping them track their progress.
• Teach the value of money by giving a young child a dollar to buy a snack, pay for it, get a receipt, keep the change and put it toward a savings goal.

Middle Schoolers

By middle school, kids are ready to handle some money of their own. Whether it comes from an allowance, gifts, or eventually a part-time job, it’s only by managing their own money—and making their own mistakes—that kids will learn to make good saving, spending and budgeting decisions. Here are some easy ways to give them real-world experience:

• Help your preteen open a savings account. (You’ll need their Social Security number.) Shop for one with no fees—another good lesson. Talk about interest and explain how compound interest works. Your bank manager might be willing to help out. That might get the kids to listen more closely. Again, encourage them to save at least 10 percent of any money they receive.
• Decide together what your kids will be responsible for paying for—whether something essential like school lunches or extras like a movie with friends. It will be up to them to make sure they have the money when they need it.
• Let kids plan a trip or night out. Give them a budget, something like $1,000 for a family vacation or $75 for a special dinner. Have them research and estimate expenses. Help them be creative and make trade-offs to stay within budget.

Teenagers

Teens want freedom and independence, but they don’t always equate that with being financially responsible. If you started their money lessons early, hopefully they’ve already established some good habits. Now is the time to prepare them for the upcoming transition to the real world of saving, budgeting, credit—even investing. Use this list as a starting point:

• Savings: Help working teens set up direct deposit to put part of every paycheck into a savings account.
• Budgeting: Whether with an online tracker or on paper, have your teens record every purchase they make for a week or two. Then take it a step further by having them complete a monthly budget planner to really see where their money is going.
• Credit management: Once you explain the pluses and minuses of credit cards, give your older teen some hands-on experience.
• Investing: There’s a lot to talk about here, but experience is the best teacher. Introduce some basic concepts about long-term investing, risk, and not betting everything on a single stock.

No matter your kids’ age, setting a good example is probably the most important thing you can do. If you’re open about your own financial challenges and make money conversations a part of everyday life, your kids will be more comfortable and confident when dealing with money.

And the lessons won’t stop when they’re off on their own. Your good example will continue on, and chances are they’ll be coming back to discuss their own money issues with you—as well as other of life’s challenges—knowing they can rely on Mom’s good counsel.

Carrie Schwab-Pomerantz, a certified financial planner, is president of the Charles Schwab Foundation and author of “The Charles Schwab Guide to Finances After Fifty.”