Kids and Cash

From toddlers to teens, it's never too early or late to teach children the importance of using money wisely.

No matter their age, children benefit from valuable lessons about money. Whether for your kids, grandchildren or young friends, use these ideas to increase their financial IQs.

Ages 3–6: Make it Visible

Something as simple as regularly saving change in a clear jar can help teach youngsters important lessons about money. Watching the coin pile grow over time makes an impact on their thinking. At the end of each month, count the change together and let them buy something as a reward. Always leave some change in the jar—say 10 percent of the total—to start off the next month. As children get older, teach them about budgeting by splitting the change up into separate jars marked for saving, spending and giving to church and other causes. Children will learn to manage their money in ways that are beneficial to them and to others. Separately, you should establish a college savings fund for each of your children.

Ages 7–8: Earn it

Encourage kids to perform easy household tasks for a small payment. They can tidy the living area once a day, sort laundry, sweep the garage or take on other small jobs. These activities put extra coins in their jars and introduce the concept of earning money by helping others. Explain that many adults have “service” jobs, much like chores.

Ages 9–12: Put money to work

Explain to your “tweens” how money grows through earning interest. Request a tour at your local bank, and ask about special programs the bank might offer for children. Help children open their first savings accounts, and encourage regular deposits. Setting financial goals is important, too, whether they want new bicycles in the near future or will be helping pay for college when those big bills arrive. As kids develop savings skills, they are gaining lifelong financial habits that will serve them well.

Teens: prepare for the future

Establish a basic budget that includes any income from allowances or part-time jobs. Have them note their monthly expenses, such as clothing, entertainment, cell phones and gas. They’ll get over the initial shock. Help teenagers open checking accounts, and explain how a debit card works. Be sure they understand that an ATM card is not a credit card. They will grasp the advantages of online banking quickly, no doubt. By now, they should already be saving for educational costs in the years ahead, and they also need to understand the connection between classroom success and scholarship opportunities. Parents and kids should research 529 plans, college savings plans offered by nearly every state. This money is not subject to federal tax, nor state tax in most cases, but it must be used for college.