This post is sponsored by SmartyPig. As always, all thoughts and opinions are my own.
SmartyPig accounts are offered through Sallie Mae Bank, Member FDIC.
Parents are more likely to talk with their kids about manners, grades, eating habits, drugs and alcohol, and even the risks of smoking than about managing money wisely. But contrary to popular belief, teaching your kids about money early will not burden them with adult troubles before their time. As a matter of fact, making them more financially aware during a time like this prepares them for the future and makes the road to wealth a natural part of who they are becoming.
Take a look at where you can start the conversation at every age group.
Children 4-6 Years Old
There’s no age limit on being a smart saver and conscious spender. While younger children may understandably have trouble grasping the concept of off-site savings, they have no problem with piggy banks for their coins and a wallet for dollars. By this age they can count so periodically encourage them to add up their money and put it back. As their savings grows, remind them of what they had at last count and what they have now. Praise them for being great savers.
Help little ones set goals for small things. Most schools have a book fair at least twice a year. Allow them to identify a book they want. Get them excited about buying whatever book they desire as long as they’ve saved enough for it. When they reach their goal, make sure to congratulate them.
The best way to encourage conscious spending habits is to exhibit them. When planning a trip to the grocery store, get small children involved in making the list. Make sticking to it a game. They’re likely to ask for something not on the list. That’s normal. Your goal is to teach them to avoid a savers biggest trouble: impulse buying. Tell them the dollar amount you wish to spend (your budget) up front and make hitting the number or coming in below a high five moment at the checkout stand.
Children 7-9 Years Old
One way to encourage your children to develop sound money discipline is to make savings a condition of any money they receive. For every dollar they earn or are given, designate the percentage that they can save, spend and give. Long term goal setting is a great tool to introduce at this stage. Illustrate the concept by helping set goals they likely won’t be able to achieve in a short time period.
While a new video game this month may be great, show them how saving the same money over 3-6 months could help them purchase the new bike they’ve been eyeing. Encourage them to find what they want online, print it down and regularly compare how much they have saved versus the cost of the item.
The more worthy and ambitious the long-term goal, you may even want to consider opening a totally free, high-yield savings account with SmartyPig. It allows you to set specific goals and add a visual which according to experts makes saving easier. And imagine adding matching grants to what they are able to save in this high-yield savings account. This will further reward your child’s savings discipline by giving them an additional dollar for every few dollars they save.
Children 10 -12 Years Old
By this age group, many parents actually begin to give their child an allowance of some kind. It’s important to note, however, that there’s been serious debates amongst financial educators over the years about earning an allowance and being given one.
What’s the difference?
Well, in the real world, adults aren’t just given money for things they should technically do anyway. We don’t receive raises at work because we kept a tidy office, showed up to work on time or had a birthday. Likewise, being respectful, keeping a clean room and emptying trash that they contribute to creating, shouldn’t be the catalyst for a sense of entitlement to more and more money. Just imagine that as they get older and find a part-time job or some other source of income, they’ll abandon household responsibilities due to it not being “their job” even though they’re still under your roof.
Any task over and beyond doing basic household chores is where the earning potential comes in. As parents we take on the burden of having to get so many things done in any given week. What can your kids help with? Need someone to come in and help file papers? Do you need a closet or drawer organized? Are you doing some spring cleaning? Get creative. What do YOU need? We know they need money, but how can you teach your kids a valuable lesson about earning AND get both party’s needs met?
Children 13 Years Old and Up
By now, your child likely has access to the internet or maybe even a smartphone. It’s time for them to know the truth about what it takes to run a household because whether we like it or not, they will be adults in just a few years and keeping it from them now, will only make it more difficult for them later.
They can start by learning the cost of typical goods and services. Let them see the electricity bill, gas bill and even a water bill. Once they understand that lights don’t come on for free maybe you can beg them to turn the lights off in their room less.
Right about now your teen is picturing themselves in a Ferrari at sixteen. So if you’re really feeling bold, show them a monthly car payment statement. Remind them that’s not all to your transportation costs and see if they can guess what else is included in that section of your budget. Assign them the task of actually researching the cost of a major purchase like a car and let’s see if they’re still Ferrari dreaming after.
At any age, set expectations for how money is earned and what’s to happen with it once it reaches their hands. Sound money management can’t begin as they head off to college. When it comes to understanding the importance of living beneath means, giving, and saving, the earlier the better.
