Being a parent and raising a child is a huge responsibility. That is not a secret. Teaching your child the difference between right and wrong and how to be a productive member in society is not an easy task. But one skill is proving to be immensely important is teaching how to be responsible with money.
With personal debt climbing each year from credit cards, mortgages, student loans and auto loans, it’s vital that the younger generation is equipped to make financially sound decisions and not find themselves under the weight of crushing debt. Parents can take steps demonstrating the value of money and there are several strategies you can use at each stage of your child’s development. This article will go over different ways to approach finances from toddler to teenager.
Toddler Years (2-5 years old)
Child psychiatrists say that children as young as three can begin to understand what saving and spending means as concepts. This is a vital time in your child’s life to display the importance of waiting to buy something after saving the necessary money.
An activity you can do with your kid is to a pick out a clear jar for savings purposes. It has to be clear so they can actually see the money grow. The jar is a good tool to use when you set a goal for your child to buy a toy. It has to be something relatively inexpensive so they do not grow frustrated with months of savings for the toy.
The jar is also helpful to show your child that things cost money. Physically seeing the money leave their hands for something can go a long way in helping them understand the value of a dollar.
Early Tween/Tween Years (6-12 years old)
You can start introducing a bit more complex concepts of money and savings. The most important thing to stress during this time is the idea of opportunity cost. Show them that if they want one item it will be at the cost of getting another item. Basically, this is the start of weighting decisions.
This is also the age whenever your child can start earning a bit of money for doing chores around the house. It’s important to have your child learn that money is the product of hard work and isn’t just given to them.
It is also suggested that when you are out shopping your child to think out loud the thought process behind your buying decisions. For instance, “do we really need this product?”, “is this a good deal?” or “is this the best price in town for this?”. Saying it out loud can help your kid know the proper techniques of being a consumer.
Teen Years (13-17 years old)
These are the years where you can express the dangers of letting debt or credit cards get out of hand, since they are one step away from being a full-fledged adult. Early on in the teen years, open up a bank account for them so they can take on the responsibility of maintaining that bank account. It can be a good time to teach them how to avoid bouncing the account from purchases they make.
This is also a good time to help them find their first jobs out in the real world. Since teenagers typically have a lot of free time on their hands, it will be crucial to show them how to get a job, a skill that will prove valuable if they go off to college and need to make money to survive.