Parents can help children become effective money managers and responsible buyers by teaching them money management skills from an early age. Financial education should be based on the needs, interests, and abilities of each child. The following guidelines may be helpful for parents:
Under 5. Around age 3.
You can start talking to your children about money. Use a piggy bank to teach how to identify and count coins and cash. Between 4 and 5, you can explain the importance of good savings habits. Help them learn that saving for a specific item and then buying it gives great satisfaction. Take your child to the store to actually see a toy he or she saw advertised. Together, examine the toy and decide if it can really live up to the promises made in the commercial. Children at this age are quite aware of commercials and sing the jingles they hear on the television and radio. Begin talking with them about the financial realities of the family and how choices are made.
Ages 5 to 10.
When children start school is a good time to give an allowance and open a savings account. You can teach them to plan the use of their money, whether from allowances or money gifts. You can also suggest that they can earn extra money by doing additional household jobs. When children begin spending money you can help them analyze their decision making. They will learn that there are consequences when we make poor decisions and that it is important to prioritize needs and wants.
Ages 11-14.
When children enter adolescence they are concerned about what their friends are doing and buying. Consequently, they tend to adopt the spending patterns of their peers. It is a good time to demonstrate the importance of comparison shopping when you buy goods and services. During this time many teens find jobs such as baby-sitting, lawn mowing or snow shoveling. They can save the money they earn or spend it for extras such as clothing, accessories, and CDs. It is important that they have control of their money because their financial successes and failures will become valuable learning experiences.
Ages 15-18.
These are difficult years when teens are trying to become independent but are still financially dependent on their parents. This is the time to seriously discuss savings for long-term goals such as college or a car. To obtain these goals many teens have part-time jobs such as fast-food restaurant workers, salesclerks, or cashiers. During their senior year in high school, some students obtain a checking account and/or a credit card to be used in college.
Spending Plan
A spending plan can encourage children to be careful money managers. The following topics can be discussed:
# identify income, including allowances and gifts
# set goals based on needs and wants
# determine expenses, both fixed and flexible
# develop a spending plan
# revise the spending plan as needed
