Taking Your Kids Through the Money Stages

Have you ever wished someone had taken the time to show you the best ways to handle money? Or maybe someone taught you how, but you wish you’d learned it earlier in life? Most of us had to learn some money lessons the hard way. Trust me, I made my share of mistakes with money—and I mean some BIG mistakes. These days, I’m happy to say I have a better handle on it, but I definitely could have benefitted from learning about money sooner.

Here’s the good news—it’s never too early to start helping your child understand money. Depending on their age, there will be different things you can teach them, but even a toddler can get the basics. Let me show you what I mean.

FROM AGE 0 TO 5: EASY MONEY

Zero? Really? Okay, maybe not newborns. But most kids, even the youngest, can understand at least one basic fact about money—you can use it to get stuff!

Once they get that, there’s no reason you can’t teach them where money comes from: work. Now listen up. I’m not talking about wearing little kids out with chores. For smaller kids who are only starting to talk, it’s enough to get in the habit of telling them where money comes from. Just be sure they see that you mean it by the way you live your own life.

For kids who are 3, 4 or 5, it’s time to start assigning them a few chores. Simple jobs like picking up toys or putting their dirty clothes in the laundry basket are definitely things they can handle.

But here’s the key thing with chores. Giving your kids an allowance is not the way to show them the connection between money and work. No one’s going to give them free money when they become adults, so don’t set them up to believe that idea now. Instead, let them earn a commission when they help around the house. I recommend giving them a glass jar or container to hold their earnings so they get to experience the fun of watching their money grow!

The idea of work turning into money is something they should be learning at a young age. And as they get older, you can assign them more work and increase their pay. It’s like a promotion!

FROM AGE 6 TO 12: BEGINNING TO SAVE AND GIVE

At this point, kids are beginning to get a strong sense of how money works. And guess what? They’re also paying more attention! So keep sharing wisdom with them and setting a good example in your own finances. Like I said when we were talking about helping younger kids, your children are watching to see if you really mean what you say about money.

With a child in the 6 to 12 range, encourage them to budget their commissions into three categories: spend, save and give. The spending part is easy. Who doesn’t like to buy stuff? But saving money and giving can be a little tougher.

First, saving. The idea behind saving is pretty simple: When you don’t have enough money to buy something, it means you have to put cash aside and not spend it until you have the amount you need. But you know what? I know plenty of adults who don’t get that! So don’t be surprised if your child pushes back against the idea of saving. A great way to show them the power of saving is to tell them about a time you saved up to buy a new TV or the latest computer. Remind them it wasn’t easy, but it was well worth it the day you finally bought it!

Now let’s talk about giving. You and I both know how important it is to share money with people in need, but it’s not always something that comes naturally to children. Help your child understand the power of giving by finding ways to show them generosity at work. For example, you could participate in a holiday gift drive and have your child help you deliver the gifts personally. When they see how giving has a direct impact in the lives of others, it can jump-start a lifelong habit of generosity.

FROM AGE 13 TO 18: JOBS, BUDGETS AND DEBT

These kids are moving rapidly into adulthood. It’s time to talk about jobs, budgeting and avoiding debt!

Depending on your child’s maturity, they might be ready to look for some type of after-school job in their teen years. This is their chance to begin earning some serious money! Just make sure your child isn’t taking on a job that could interfere with schoolwork or family time.

Whether they get a job or continue earning money helping out at home, now’s the time to show your teen how to budget their money. The first step is to make a list of all the things they need (or want) to spend money on. For a teen, it could be as simple as give, save and spend categories. Next, on the same piece of paper, they should write down their monthly earnings. Then show them how to tell every single dollar what to do. When they subtract their expenses from their earnings, they should get zero.

Finally—and this last one is huge—you have to teach your child to avoid debt. As someone who has struggled with debt in the past, I can tell you it’s a really bad idea! Credit card companies will work hard to get your child to sign up for a credit card, and many of your child’s peers will likely take out student loans for college. Be sure your teen knows about the crippling effect debt can have on their life, and remind them they can go to college and have a great life without ever borrowing a dime!

So that’s it. At any age, there are plenty of ways you can share solid money wisdom with your child. Keep in mind, the right time to bring up each lesson will depend on your child’s abilities and maturity. And remember that what they see you doing with your money is even more important than what you tell them.

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