From learning how to count change, to the pitfalls of credit cards and debit cards, to living on a budget, our kids have a lot to learn about money before they go off on their own. It would be great if personal finance was taught in school, but it rarely is, so it’s our job as parents to equip them with the knowledge and practice they need to develop a good relationship with money.
Ages 2-3
It may not seem like a toddler or young preschooler is ready to learn the ins and outs of budgeting, saving and investing (they’re not), but they do like coins and gadgets. A 2-year-old won’t be able to grasp the values of differing denominations but they can be given a basic introduction that some things are more expensive than others. Encouraging them to start saving any real money is a good idea. Although a piggy bank is great, they can get even more satisfaction from using a clear plastic or glass jar, so they can actually see the money accruing. Do make sure you’re supervising them whenever they have coins so they don’t swallow them and you should wash their hands afterward.
Ages 4-5
This is when we can start to teach them the three basic things we can do with money; save it, spend it, provide it. You might set up three jars for them so they can more easily split their money into essentials (needs), spending (wants) and savings. The 50/20/30 budget is also a good way to encourage thinking about allocation. Introducing the idea of saving, spending and essentials now, in its most basic form, will lay the foundation for how you talk to them about money in the years to come.
Ages 6-8
By this age, kids understand that grown-ups have jobs to make money and that much of what they see around them, such as their home, the family car, their Friday night pizza; is paid for with that money. You can start to explain to them the difference between using cash, debit card or credit card. This is a good age to start letting them attempt to make their own simple purchases in a store. If they want to earn a little money being entrepreneurs themselves, these are the prime times for lemonade stands or similar! If they don’t already have a bank/savings account of their own, this is a great age to open one up. They may have some money they keep at home in their jars but it’s also good for them to get accustomed to the idea of noting records and any interest earned. Take them to an actual bank to open an account; they will feel very grown up!
Ages 9-12
In my experience, this is the age that kids can really get into the concept of earning money themselves, if they haven’t already. By now, they may be running a side hustle or thinking of crafts or services they could sell, such as car washing, personalised drawings, hand-drawn comic books or colourful painted rocks. If you’re ever going to have a garage sale, this is when they’ll be the most in to it and it’s a great way to teach them about determining the value, organising and displaying of items for sale, as well as negotiating with a buyer. Enlist their help and split the profit with them or divide up the profit into piles for the family as a whole; spend, save, essentials. At this age, you should develop the discussions about how you decide what you spend money on. “Being able to afford it” and “choosing to spend money” are two totally different things. At this age, it’s also a low-key, easy way to introduce some rudimentary discussions about investing and the future.
Ages 13+
By the time they’re teenagers, they’ll probably be looking to make a little extra money in addition to any allowance they’ve been earning or whatever products they’ve been selling. This is the perfect age to help them develop different long term savings goals, whether it be saving for a new smartphone, other tech, perhaps even their first car. Eventually, the kids are going to graduate to debit cards and credit cards, but I’d suggest you keep them using cold, hard cash for as long as possible. It’s much easier to see what you have in cash than paying by card or phone. They are more likely to develop good money habits if they feel that little bit of pain when considering how they part with their hard-earned (and managed) cash for that pair of desired sneakers.
