These days, kids control the family purse strings; according to CBS News, children 8-12 now pump $30 billion of their own money into the economy each year, along with another $150 billion of their parents’ funds.
But just because children are savvy consumers doesn’t mean they appreciate the value of a dollar. The hard truth: they may not, according to Andrea Travillian, author of Little Kids Big Money: Tools for Teaching Kid Friendly Finance. Children aren’t born with innate financial knowledge, she says. “Some kids are natural born spenders, while others are natural savers. But they all need financial guidance.”
Learning the art of sound spending doesn’t happen overnight. Read on for age-specific strategies to help build healthy financial habits.
Toddlers and Preschoolers: Penny Wise
Ideally, financial training should begin in early toddlerhood, well before kids are old enough to carry a kid-size wallet or handle money of their own. Parents can model the importance of budgeting, letting young children help plan shopping lists, shopping around for the best deal, and distinguishing needs from wants. “Your body needs healthy food like carrots, and that’s what we’re buying today. That sheet of stickers is something you want, and that can wait.” Resist the urge to scoop up strategically positioned toys and candy at the register (even if kids beg for them); saying no to impulse buys shows kids the importance of planned spending.
Kindergarteners are often ready to begin receiving a small allowance, says Karen R. Keatley, an independent financial planner. Some families give one dollar per year of age; others choose a larger amount and split the funds between spending money and a bank account in the child’s name. Keatley chose the latter option for her two children. “They never touched the money in the bank,” she says. “But they always knew it was there.”
Elementary Age: Fundraising Fun
Drowning in requests to sell cookies, wrapping paper, or who-knows-what for your child’s school or club? Be grateful–the fundraising drives that pepper the school years are full of financial value for kids, says Travillian. Fundraising can begin to teach young children the concept of working for money along with the reality that the activities and organizations they enjoy cost money to maintain.
To turn fundraising into a lesson in finance, make sure kids know how the money they’re raising will be used. Make use of the Internet and maps to help children visualize faraway fundraising beneficiaries. Most importantly, children should do the majority of the fundraising work, says Travillian. “Don’t take the order form to work for them. Make them come to work and ask for the sale. Make them call their grandparents. They should be the one in the driver’s seat!”
Tweens and Teens: Checks and Balances
The best way for teens to learn the joy of a dollar earned is to let them actually earn their own dollars. According to Keatley, a part-time job is a must for teenagers. “Earning their own money and making their own financial decisions is a key experience,” she says. “It helps them to learn the connection between working and having money in the bank.” Teens who don’t work during the school year can hold down jobs during the summer, she says.
Along with a teen’s earnings, allowance from parents for clothing or incidentals can be deposited into a checking account, so teens can learn to balance statements themselves. And no matter how much teens whine or pout, avoid doling out more money or repeatedly “rescuing” teens who come up short at the end of the month. Instead, create a spending plan that shows income, expenses, and goals. It’s all about making sound choices, says Keatley. “Teens need to understand that they may not be able to have a latte every day and designer jeans, too.”