I remember when my kids were young and they wanted everything in the stores as well as what they saw on television. It is difficult to explain to young children that there is a limited amount of money in almost anyone's household budget and what they think are absolute needs are actually wants. As my children got older, they wanted driver's licenses and cars and could not understand why they were not driving around like their friends.
As parents, we did not do a good job of teaching them about money. Mostly because money was a struggle in our family and we did not want to burden our children with our money problems. Partly because if we shared our struggles with our children, we were afraid we would have to admit to ourselves what a hole we were in, and we did not want to look bad in front of our children.
Fast-forward 10 years to children that are now young adults and have money struggles of their own. Fortunately, I gained the knowledge necessary to change my money behavior and I am in a position to help them gain the skills and behaviors that I should have been teaching them all along. They will still learn their lessons earlier than I did and will live better lives.
Here are the top 10 things your children should know by the time they reach middle school and some ways to help your children understand the concepts from moneyasyougrow.org . This site has been endorsed by the Presidents Advisory Council on Financial Capacity and by the American Library Association as a great website for kids. There are 10 more "rules" on the Money as You Grow site for older teens. Advance as fast as you think your child has grasped the concept and can practice that behavior. Then you will have raised a money savvy kid!
Age 3-5
You need money to buy things
Identify coins and their value.
Discuss how you may value something that is free, such as playing with a friend.
Identify items that cost money, such as ice cream, gas for the car, or clothes
You earn money by working
Describe your job to your child.
Walk through your neighborhood or town and point out people working, like the bus driver or the police officer.
Explain that some people start their own businesses, like clothing stores or restaurants, and those people are called entrepreneurs.
Encourage your child to think about how she could earn money by setting up a lemonade or cookie stand.
You may have to wait to buy something you want
When your child is standing in line for a turn on the swings, or looking forward to her favorite holiday, point out that sometimes we have to wait for things we want.
Find three jars (or cans) and label one for saving, one for spending, and one for sharing.
Suggest that your child put some of the money she gets into the saving jar, so she can buy a toy or treat when she has saved enough.
There's a difference between things you want and things you need
When you are out shopping, point out essentials such as food and clothing, and ask your child to describe items that she may want but are optional.
Talk about how your family decides what to buy and what to pass up. Which is more important, buying cookies or fresh fruit? Soda or milk?
Draw a circle and divide it into sections for food, rent or house payments, clothes, and " items," to show that there is a finite amount of money to spend.
For kids age 6-10
You need to make choices about how to spend your money
Include your child in some of your small decisions. For example, at the grocery store, explain why you pick one item over another.
Give your child two dollars and let her choose which fruit to buy.
When shopping with your child, ask yourself aloud: Do I need this item? Can I borrow it? Would it cost less somewhere else?
It's good to shop around and compare prices before you buy
With your child, compare prices for a particular toy at various online or brick-and-mortar stores.
Use coupons and discount cards, and show your child how much you are saving.
Consider allowing her to keep part of the savings, if she helps clip or print out coupons.
It can be costly and dangerous to share information online
Know the websites your child visits.
Decide which websites are appropriate, and block any inappropriate sites using parental control software.
Make it a rule that your child never gives out any personal information—like her birth date, address, phone number, or school—when on the computer.
Do not allow her to buy anything online without your permission.
Putting money in a savings account will protect it and pay you interest.
Visit a nearby federally insured bank or credit union with your child.
Ask about the interest rate on a savings account.
Discuss with your child how money in savings accounts is protected by federal insurance. If the bank goes out of business, she will get her money back.
Open a savings account for your child.
You should save at least a dime for every dollar you receive
Encourage your child to always save 10% of the money he gets.
Have your child set a goal to buy something he wants, and have him work toward that amount.
To reinforce the savings habit, go to the bank two to three times a year with your child to deposit savings into his account, and look at how much bigger the balance is on each visit.
Consider a "matching plan" for your child's savings: You put in 25 cents for every dollar he saves.
Entering personal information, like a bank or credit card number, online is risky because someone could steal it
Discuss the dangers of entering personal information online.
Explain that thieves can use Social Security numbers or other personal information to open credit cards or create fake documents.
Raising money savvy kids is a necessity in today's economy. Not only is it smart but it can save you money too! Check back later this month for tips for money savvy teens.