Family

Money as They Grow

Savvy skills kids can take to the bank

With our weekend schedules swamped with extracurricular activities, the days of a Saturday morning trip with Mom and Dad to learn how to deposit money at the bank (and snag a lollipop) are long gone. Still, one of the best skills we can teach our kids is the ability to manage money. So how — and what, exactly — do we teach them?

Money expert and author Dave Ramsey, who founded Ramsey Solutions, says there are four main areas connected to money that children need to learn.

“Work, give, save and spend,” he told LifeZette in an email message. “There has to be a connection between work and money. Giving brings your kids depth of character, and it’s fulfilling and fun to watch them give as they grow up. Saving is a great way to teach goal setting, as it is a tool to help control your circumstances and helps you make big purchases. Spending is also a reward of disciplined saving and working. It can be the celebration of a goal reached.”

Related: Managing When Mom’s Away

One popular way to help kids connect work and money is to give them chores.

“Paying kids for chores is actually controversial,” said Deb Cohen, assistant director for the Center for Parenting Education. “Some parents feel kids should be doing chores as contributing members of their family, while others feel being paid for doing a good job is important, and helps to learn to manage personal money.”

One potential wrinkle with chores? Some kids are not money-motivated.

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One potential wrinkle with chores? Some kids are not money-motivated.

“I have a kid whom I encouraged to get a job and save a bit, and he informed me that his plan was to live off his birthday money,” Cohen told LifeZette, laughing. “So with that type of kid, it is more of a challenge.”

Another tactic to teach kids to save? Make it fun.

“Try making a game out of wealth building or saving to buy something,” Ramsey told LifeZette. “Have (the kids) pick out something they want to buy. Then, simply divide the price of the goal by the amount you plan to save each week to see how many weeks or months it takes to ring the bell.”

Related: Screen-Free Parenting

Corporate America is getting in on the youth financial education act as well. Young Americans Bank in Denver, Colorado, is the only bank in the world specifically designed for young people ages 21 and younger. At this youth bank, kids perform all the banking tasks typically done by adults: opening and maintaining savings and checking accounts; obtaining a loan; opening certificates of deposit; and using credit, debit and ATM cards.

Young Americans Bank also has kids count coins, according to its website – a particularly useful tool for young customers who often deal primarily in metal.

Why else should children learn about saving and budgeting?

“Teaching kids to manage money also teaches them to do things for themselves,” Cohen said. “A lot of parents are so busy having their kids ‘perform’ in sports and extracurriculars, they are forgetting to teach them the basics.”

Teaching kids to manage money also teaches them to do things for themselves.

Ramsey also believes that learning about money is learning how to live responsibly – and learning to wait for things.

“There’s nothing wrong with giving your kids things, but when you give them everything, you’re missing out on the opportunity to teach them valuable lessons about money,” he said. “Your kids still need to make the connection between work and money and the importance of delayed gratification. Kids have a certain sense of pride when the save up and pay for something themselves.”

Related: Tips for Parenting Your Teens

Many financial experts agree that kids can learn about saving money as early as age 3, and those lessons should continue throughout childhood.

“The earlier they start learning money lessons, the more engrained the good money behaviors will be,” Ramsey said. “But whatever age your kid is, the important thing is that you are intentionally teaching them about money and modeling the right way to handle it.”

Here are some age-specific milestones kids should reach, according to the President’s Advisory Council on Financial Capability:

AGES 3-5:
1. You need money to buy things.
2. You earn money by working.
3. You may have to wait before you can buy something you want.
4. There’s a difference between things you want, and things you need.

AGES 6-10:
1. It is good to shop around and compare prices before you buy.
2. It can be costly and dangerous to share information online.
3. Putting your money in a savings account will protect it and pay you interest.

AGES 11-13:
1. You should save at least a dime for every dollar you receive.
2. The sooner you save, the faster your money can grow, from compound interest.
3. Using a credit card is like taking out a loan. If you don’t pay your bill every month, you’ll be charged interest and owe more than you originally thought.

AGES 14-18:
1. You should avoid using credit cards to buy things you can’t afford to pay for with cash.
2. Your first paycheck may seem smaller than expected since money is taken out for taxes.
3. When comparing colleges, be sure to consider how much each school will cost you.

Educating kids about money will have other positive spillover effects as well. It teaches responsibility, accountability, and self-reliance — and those are skills you can take to the bank!

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