For years financial matters have been taboo – rarely discussed amongst adults, let alone with children. However, concerns over growing student loan debt, credit card use and the repercussion of the Great Recession have put a spotlight on the importance of financial mentorship that starts at an early age as of late.
It also helps improve their math and critical thinking skills.
The younger generations are recognized as an underserved group when it comes to financial literacy, though studies have shown that the earlier we start teaching kids about money, the more capable they are at managing their finances as they get older.
Money Mentorship at Every Age
Giving our kids a strong financial foundation starts early and at home. And, being a positive financial mentor for children means understanding how to approach the conversation and relay the concepts in a meaningful way at every age.
4-9 Years Old
Warren Buffet himself said that parents shouldn’t wait until their kids are teens to start teaching them about money management. He suggests that parents begin the process as early as the preschool years and be consistent throughout the child’s life. In these early years lessons about money have to be kept basic and fun.
- Check out Warren Buffet’s animated kids show The Secret Millionaires Club.
- Get your child three piggy banks and label them “Spending”, “Saving” and “Sharing.”
- Have your child set goals for their “Saving” piggy bank.
- Help them start a business – lemonade stands are a tried and true first business for young entrepreneurs.
- Involve them in budgeting tasks like grocery shopping and coupon clipping.
- Consider giving them a small allowance that they can use to pay for extras.
- Utilize games like the Saving Spree app or the classic Game of Life to make lessons more fun.
- Practice comparison shopping together.
10-13 Years Old
At this age kids are getting a better understanding of how money plays into the many aspects of life and what socioeconomic levels exist around them. Money begins to take on a new and important meaning, which you can help foster.
- Use an allowance as a means for pre-teens to start managing their money, paying for extras and saving for things that they want.
- Incorporate in ways for kids to earn additional allowance by doing chores or making good grades.
- Help them open a savings account and stress the importance of socking money away. You may event want to consider a 401K-like matching program to add an incentive to save.
- Encourage them to budget for donating to worthy causes.
- Create a personal finance organizer for your child to use.
- Begin explaining the concepts of credit and debt.
- Have a frank discussion about online shopping and lay out the rules that must be adhered to.
14-16 Years Old
Between the ages of 14 and 16 is when many kids start looking for their first job. With money of their own coming in, the importance of money management takes on a whole new meaning. It’s the perfect opportunity for kids to learn the value of a dollar and how to make the most of the money they earn.
- Help them set up a checking account and begin the process of explaining the concepts behind invests.
- Have them contribute to bill payments such as their cell phone, car insurance and non-necessities.
- Involve them more in the household budgeting to show that financial management is an important part of everyday life.
- Expand their understanding of credit and debt by explaining the basics of credit cards and what their credit history is.
- Give them money for a specific purpose, such as gas or lunches, to teach them about allocating their resources responsibly.
17 and Beyond
As your child moves towards striking out on their own, it becomes increasingly more important that they understand how to manage their finances. Once they reach the age of 18 they can open credit card accounts, enter into financial agreements and make contracts on their own. Guide them in making smart financial decisions in young adulthood.
- Open a joint credit card account that’s in your child’s name, but make them responsible for paying the bill each month.
- Discuss how the finances will transition after they graduate high school – topics include monthly bills, housing costs, transportation, etc.
- Help them invest their money – provide advice for buying a few shares or investing in bonds.
- When looking at colleges work together to calculate and discuss the costs.
Parents are the first and most influential money mentors for their kids. The habits we help them form early in life create a domino effect that continues well into their future, which is why it’s important to make sure their first few dominoes are well-aligned. Share your top finance tip for the 18 and under crowd below.