Raising a Financially Responsible Child

You've been working hard on your finances, but you have kids who love to spend money almost as wildly as you used to. How do we teach our children about money?

Below are age-appropriate ways to raise a financially responsible child, including some of my favorite tips.

Toddlers: Lead by Example
Children learn by example, and their most influential role models are usually their parents.

…even parents like you and I who have ADHD.

You can't teach a toddler how to budget. However, they will learn by hearing what you say and observing your behavior.

Studies have shown we've developed a basic understanding of financial behavior as early as age 7.

It's never too early to start talking about money with our kids, so lead by example.

First to Fifth Grade
We know money doesn't grow on trees, so kids need to learn where money comes from and how to earn it.

Earning an allowance doing chores is a great way to excite kids about money.

A piggy bank or lidded glass jar is an excellent tool to see how much money they're saving and help them learn to save up for things they want to buy, thus avoiding impulse spending.

Sixth to Eighth Grade
By middle school, kids have a pretty good understanding of money and can grasp the concept of a career and a paycheck.

Help them by explaining the difference between salary versus what you take home due to taxes, Social Security, insurance premiums, and other standard deductions.

Jump$tart Coalition created national standards for educators to set financial literacy goals. Their recommended benchmarks by eighth grade include:

• Set priorities to reflect spending goals and values
• Discuss the components of a spending plan that includes income, savings, and expenses
• Compare saving strategies, including "Pay Yourself First" and comparison shopping
• Illustrate how inflation and interest can affect spending power over time
• Justify the value of an emergency fund

 
High School
Teenagers look for and need new levels of independence. Many of the lessons at this stage are firsthand experiences with a checking account and budgeting for college.

Personal checking and savings accounts don't establish credit; they show how to handle finances. A checking account is all a teenager should need, but it’s also good to have a savings account to witness the impact of compound interest firsthand.

Credit cards are another big lesson for our teens. Teenagers must learn the dangers of credit cards and how to use them wisely. Teach them to pay off the balance each month and avoid buying things they can't pay off.

The Importance of Being Benevolent
Charitable giving helps kids understand the impact money can have on others.

Here’s a tip: Have your child use three piggy banks for saving, spending, and giving.

Each time they receive money, they split the cash between the three. Ask what they plan to do with each amount to prepare how they'll use it.

You could also further incentivize them by matching the money they save, much like a company 401k.

Investment Accounts
Teach kids about investing and compounding. Talk about their favorite toys or gaming systems, then show how to invest in the companies who make those items. They learn how they're not only an owner of the product, they're investing in the company that makes it too!

Resource links:
Jump$tart Coalition for Personal Financial Literacy - https://www.jumpstart.org
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