Money Management for Kids: There is No Time Like the Present!

money

By now, most of us know one thing to be true: being a parent is hard. Each day brings new trials and tribulations. And most of the time, we haven’t fully mastered yesterday’s challenge before today’s has crash landed in front of us.

It is easy to put certain tasks off. Yes, it’s probably time to teach your preschooler to tie his shoes. But when you are 10 minutes late for work because breakfast exploded on the stove and your iPhone fell into your mug of piping hot coffee, now is not the time.

You’ll do it later.

Some Things Can’t Wait

I was recently hired as the content writer for a bankruptcy lawyer. While I love being a freelance writer, this particular job has stressed me out. Why?

I spend my days researching things like bankruptcy, foreclosure, loan modification and debt relief. I write about the odds of children being able to get student loans for college because of their parent’s bankruptcy. . I read heartbreaking stories about people losing their family home of 25+ years. I offer tips about how to file for bankruptcy.

And all this exposure to financial distress has lead me to one conclusion: it is never too early to start teaching our kids about money management.

After my first day of work, I rushed home to devise a plan—a plan to start educating my kiddos about the importance of compound interest, 401Ks and retirement accounts.

Ok, so maybe my lessons weren’t that detailed–yet. But they will be. We’ll work up to those life-changing subjects.

And you should too. Here’s how.

Start Young: Lessons for Kids Ages 3-5

Kids as young as three know about money. Think about how quick your little ones are to say, “I want…” As soon as you tell them you don’t have the money for it, they tell you, “Use the card.”

It’s unfortunate that we live in a world led by the concept of buy now, pay later. You don’t want your children getting into that habit–it only leads to debt.

Even your youngest children can be taught that a trip to the store doesn’t necessarily equate to something new. Tell them that you’re there for X and that’s all.

Teach them there are times you have to wait to acquire the things you want. Teach them to start putting money aside and saving up for that Monster High Doll or DS game.

Give it a try…

Help your kids create three jars. Label them:

  • Spending
  • Saving
  • Sharing

Let them use the first jar for minute purchases and then the second jar for those bigger items they’ve been waiting for. Don’t forget the third jar; helping others is an important factor of fiscal responsibility.

Keep the Monetary Learning Momentum: Lessons for Kids Ages 6-10

Don’t stop using the jars once your kiddos head off to kindergarten. Those are important lessons that, once mastered, can last a lifetime and make a world of difference in your youngsters’ bank accounts as they age.

Add in now the concept of wise decision making. It’s important that kids understand that choosing what to spend their money on is a significant aspect of financial maturity.

You have to convey to them that these choices will deplete their monetary reserves and that those reserves don’t fill up on their own. Therefore, they must consider the real value of their purchases.

Give it a try…

Vocalize your thoughts during the buying process. Pose questions to your young shopper about the difference between regular and sale price items. Talk about generic vs. name brand goods.

Give them some money and have them pick out cereal based on the concepts you’ve been discussing with them. If they’re listening, they’ll bring back a deal!

Compound the Complexity: Lessons for Kids Ages 11-13              

The older your children get, the more complex the lessons should become. As they are approaching middle school, start teaching them about saving early and the benefits of compound interest.

Give it a try…

You don’t necessarily have to understand it all on your own. Just explain to them that if they set aside $10 now, they’ll have $2300 when they’re 65. Whereas, if they waited until 35 to set that same amount aside they’d only have $700.

Use a compound interest calculator to teach children about how money grows. Show them what happens if they put $100 in the bank every year, starting now (it will grow to $23,000 by the time they are in their mid-60s). However, if they don’t start until they are 35, their nest egg will be much smaller ($7,000).

Now’s your chance to show them the value of sacrificing some of the smaller, nonsensical things for the hope of larger, more useful stuff. Tell them to give up the ice cream after their school lunch. That money can be put aside to buy something way better.

Make Them Education Minded: Lessons for Kids Ages 14-18

With astronomical student loan debt out there, you don’t want your children to walk around with that kind of life long burden.

If you plan on helping your children with some of their college costs, let them know exactly how much you plan to contribute. Then, together, determine how much children will be responsible for.

Show your children that private colleges often offer more scholarship opportunities. Yes, these schools cost significantly more, but if your student is hardworking and/or talented, the scholarships offered at these institutions can make their costs comparable–if not better–than state schools.

Discuss the FAFSA with your son or daughter. Go over the possibility of debt and its effects on life after college. Then, determine what the employment rates are based on your children’s areas of interest. See if there are any programs that will help pay back student loans should they go into the field you are discussing.

Give it a try…

Teach them the value of work. Encourage your children to get part-time jobs. Life isn’t a free ride and you are doing them a disservice if you don’t teach them this vital survival skill.

In addition, having a job will better prepare them for financial responsibility, enable them to save, and assist them throughout their college experience.

Let Learning Linger: Lessons for Kids Ages Over 18

Just because your kids are technically adults doesn’t mean you have to throw them to the fiscal wolves. This is when the credit card companies come at them the hardest; if you haven’t prepared them for the attacks, they will become victims.

Keep your relationship open enough that they’ll come to you with all their financial questions. Eventually they’ll want a new car or a house, and they are going to need trustworthy advice.

Give it a try…

Help your kids find a low interest, no annual fee card. If you choose to cosign with them, explain the gravity of that decision and how their choices can directly affect you.

Explain to them that a credit card should only be used when it can be paid in full within the same month. Unpaid balances equal added interest; then, things cost way more than they are worth. Who wants to pay interest on groceries or McDonald’s?!

Money Matters

As adults, we all know the value of hard earned cash. It’s critical that we now teach our children how to handle their funds responsibly.

Have you already started teaching your kids about money? What sticky situations have you encountered? Let us know! Are you hesitant to embark on a money management journey with your kids? Tell us why.

Jessica Velasco is a Des Moines native, mother of two boys, and lover of ice cream. When she isn’t writing, she is probably cleaning crayon off the walls, chasing the escaped dog around the neighborhood or feigning deafness in the bathtub.

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