Kids & Money: Principles To Teach at Each Age

Teaching your kids responsibility when it comes to money is an effective way to invest in their future, and you can start teaching them earlier than you might think! Let’s take a look at money principles that you can teach your children at any age.

Toddlers

From as young as the age of 3, kids are already forming their own ideas around money. They mimic the things that you do, so you can start establishing good money habits by simply modeling your own good money habits to them.

As parents, we often forget our kids learn by seeing, so in modeling your money habits, do so physically (not just verbally). For example, make a list for the grocery store and check it off as you put items into your cart. While simple, this shows them budgeting basics and how to avoid impulse buys. If they ask for something not on the list, explain why you can or cannot buy it.

At this age, you can also begin teaching them to save. Grab a clear jar, and as they receive money for birthdays and other occasions, have them put it in the jar. While they may not understand the value of money yet, they will see their money “growing.”

Lastly, start teaching your kids how to make decisions. You can do this by giving them two options and making them pick one. They may struggle early-on. If so, give them a timeframe to make the choice. It can be as practical as picking between two outfit options for the day, or choosing the shoes they want to wear. Not only will this help build self-confidence and empowerment, but as they get older, this skill will help guide choices when it comes to their buying behaviors.

Pr Es Chool And Kindergarten

At this age, your kids may still not grasp the value of money, but they know that they need it to buy things. You can help establish this value in a few ways.

Explain how you make money. Around three or four, your child will probably ask you why you go to work. When she/he does, use it as an opportunity to explain that working allows you to make money so you can buy things like food, clothes, and more.

Show your kids that things cost money. Grab a few of their dollars (aka their budget) and take them to a store of their choice. When selecting their items, remind them of their “budget.” It never fails that they will select an item or items outside their budget. Explain that they will have to select a new item or put an item back to stay within their budget. Let them physically hand the money to the cashier to complete the transaction.

Elementary School

Between 1st and 5th grade, your child will have a better understanding of the value of money, so now it’s time to show them the benefits of earning and saving money.

Remember the glass jar tip we spoke of in the earlier section; consider expanding it to multiple jars: Savings, Spending, and Giving. Explain the importance of each. While the Giving jar is typically beyond standard budgeting practices, we recommend it. Teaching kids to give at an early age instills the importance of helping others. A practical way to put this into action is by encouraging your kids to use their own money to buy their siblings/parents birthday or holiday gifts. By doing so, they also experience the joy in giving.

Kids at this age are ready to start earning an allowance by doing simple things such as making their bed, cleaning their room, or helping fold clothes. If there is an item they want to buy, remind them of the importance of saving for it. This shows them that money is something that must be worked for, and saving it helps them earn things that they want.

Lastly, show them that instant gratification is not always best. Help them weigh opportunity costs — If you buy this now, you won’t have enough money to buy the other item in the future. This conversation is also key in teaching your kids how to avoid impulse buys. If your child sees something at the store, don’t just buy it. Instead, consider making them save for it or wait for a holiday or special occasion to get it.

Middle School

Throughout the pre-teen and early teen years, begin giving your kids the responsibility of managing money. Take the glass jars mentioned in the previous section, and use the funds to open up a bank account. By 14 years-old, most financial institutions will allow your child to have a debit card, as well as online and mobile banking. Teach your child the importance of deposits and withdrawals, and the importance of not overdrawing his/her account.

Take this to the next level by allowing your kids to manage their expenses. For example, instead of taking them to back-to-school clothes shopping, deposit the funds you’d plan to spend into their account.

When taking them shopping, leave it up to them on how to make the purchases (i.e. bargain shopping or name-brand). You can even do this with back-toschool supplies or an “allowance” for extra-curricular activities with friends.

Teach them the power of price comparison. A simple way to do this is by taking them to the grocery store. Compare similar products (i.e. price, quantity, ingredients, flavor, etc.) to determine which one is best. While basic, in the long-term, this simple practice will aid in future large purchases such as a car.

Lastly, the middle-school age tends to be the years of comparison, and social media does not help. Be intentional about teaching your kids contentment. Doing this now will help them avoid the vicious cycle of “keeping up with the Jones” as they get older.

High School

As your kids start thinking about life after school, start giving them a taste of “adulting.”

Help your teen learn how to make money. He/She can get a part-time job or put his/her entrepreneur hat on. While most teens would love the option to forgo working, the reality is that sooner or later they will have to. So, starting early will instill essential soft skills that will set them up for success long-term, all while helping them bring in income and add to their resume.

Give them financial responsibilities. At this age, your teen should have a good grasp of wants versus needs. For the “wants,” consider making them pay for items such as outings with friends or clothing. For the “needs,” if income allows, consider making them pay for items such as his/her car insurance, gas, or cell phone bill.

Lastly, expose them to financial tools. By this age, your teen should understand how to manage a personal bank account. Now, introduce them to the power of compound interest. This can be done by opening a savings account, certificate, or even an investment account. You can also teach your teen the responsibility of credit - from building credit to opening their first credit card. By giving them an understanding of these financial tools, you can help prepare them when they start making those money decisions on their own.

Ready to set your kiddo up with their first account? Spero is here to help! Stop by one of our convenient branches to set your child up for future financial success.