It’s never too early to teach your kids the value of a dollar. As a parent, you have a lot to share with your children about earning, saving, spending, and managing money responsibly. And because personal finance courses aren’t typically offered in grade schools and even high schools – currently only four states require a one-semester course in personal finance for high school graduation – you play an especially critical role in their financial education.
So where do you begin?
The earlier kids are schooled in responsible money management, the better! Start by setting age-appropriate goals – and help your children grow into financially responsible adults with a solid financial foundation.
Setting money goals as your child grows
Ages 6 to 10
“By this age, kids should have a basic understanding that money is exchanged for goods,” says Crissy Hayes, vice president of operations at Cobalt Credit Union. A good next step is to talk about saving and teach your child to make quality choices when making purchases.
Goal 1: Find the deals.
Involve your kids in shopping trips and set goals like finding the best deal on a new backpack. Talk to your child on the shopping trip, asking: Would this cost less somewhere else or with a coupon? To reinforce the concept, allow your child to keep part of the savings if she helps clip or print out coupons.
Goal 2: Save a set amount.
This is a good time to open a savings account and teach kids that depositing money into the account will protect it and help it grow over time. Set achievable saving goals to introduce the concept of setting money aside. Specialized kids’ savings accounts like Cobalt Credit Union’s Dollar Dog Kids Club savings account help to make saving money fun.
One way to help your child learn and reach their goal is to give allowances in denominations that encourage saving. For example, give five $1 bills instead of one $5 bill and recommend that $1 be saved.
Ages 11 to 13
This is a great age to reinforce the value of saving, as well as to start exploring the idea of credit.
Goal 1: Save for a purchase.
Encourage your child to save for something he or she wants, like a new bike or tablet computer. To help them save for the purchase, have your child set aside at least a dime for every dollar earned. Putting the savings goal in writing can be both helpful and motivational. For example, write each week’s balance on the calendar and estimate the end date when your child should reach the goal.
Tweens can gradually earn more responsibility for their spending. Around age 11, for instance, you might let your child purchase her school supplies and her pet’s food and toys. By 13, you son could buy a few back-to-school clothes and other essentials.
Goal 2: Repay a loan.
Once your child has mastered the basics, he or she is ready for borrowing. The goal is to teach that generally it’s better to save and buy something, rather than borrowing and paying later. You can teach that by acting like a lender and charging interest. Set short repayment goals and ensure that you charge enough “interest” to get the idea of saving over borrowing across.
Ages 14 to 18
At this age, goals should help teens prepare for the future – and put them on the path to responsible money management.
Goal 1: Earn money for a purchase.
This is a good age to encourage your child to find a part-time or summer job, which provides a great opportunity to establish a connection between hours worked and spending. Let your child set an earning goal and then translate that to hours worked. For instance, help calculate how many hours your daughter will need to work to buy that concert ticket or new pair of jeans.
Goal 2: Open a checking account.
When your child begins his or her first job, this is a good time to set up a checking account at your credit union (one that pays dividends on the account balance is a big bonus). Show them how to use online banking and account-monitoring tools. Comparing their digital records to their monthly statements is also an important habit to begin at an early age. Overall, managing a checking account will help them understand record-keeping responsibilities, as well as the consequences of overdrawn accounts.
Goal 3: Save for the future.
This is also a good time to set up larger goals, such as saving for college. Talk to your child about the increasing costs of higher education – and the importance of having a small emergency fund. Put together a list of future savings goals, and then create a monthly money strategy so your child can get in the good habit of consistently saving for the future.
Money Tips for Teens
“Encourage your teen to develop a budget, either on paper, on the computer, or via free online budgeting software or budgeting apps. You want to make the budget process as fun as possible so that your child has the motivation to stick with it over the long term,” says Crissy Hayes, vice president of operations at Cobalt Credit Union.
Cobalt CU’s Banzai Financial Literacy Program addresses budgets and is designed to help establish good financial habits involving insurance, debt, and more before teens dive into the real world.
Did your parents set financial goals for you that were especially helpful? How do you talk to your kids about money?