When it comes to money management, the best lessons are taught early.
“Although it can be awkward at times, talking to your kids about money at a young age is extremely important,” explains Steve Trumble, president and CEO of the non-profit American Consumer Credit Counseling (ACCC). “The most vital lessons for children to learn [are] the value of the dollar and the importance of budgeting and saving. By learning these concepts early on, there is a better chance they will have successful financial lives.
Parents interested in teaching their children about personal finance can follow these stepping stones, recently outlined by ACCC:
For Children in Kindergarten – Grade 2 – Communicate the most basic principle: money must be earned. Set up a savings account for the child(ren), and allow them to deposit earnings they’ve accumulated from completing household chores.
For Children in Grade 3 – Grade 6 – Help the child(ren) develop responsible spending habits. Try this exercise: have them make a list of five things they need and five things they want, ranking both lists in order of importance. Show them the estimated cost for each need and want, emphasizing the savings needed to purchase them.
For Children in Grade 7 – Grade 12 – Introduce credit carefully—make it clear that it is not “free” money. To demonstrate, allow the child(ren) to borrow money from you, complete with a limit, repayment terms, and a standard interest rate.