Money management does not have to be intimidating or laced with the mystique of a foreign language, as many adults view it. You can help your children establish better financial habits by teaching them about spending, saving and investing while they are still young. Regardless of how much money you have, the same basic lessons apply.

Providing a financial education may require some serious thought and self-education on the part of the parents, but it will pay off handsomely for the entire family in the long run. Consider the significant role that money plays in our lives, as well as its powerful emotional impact. Knowing this, it’s hard to believe that we often avoid the subject. In many families the very mention of money is taboo, which only heightens discomfort, procrastination and incompetence regarding money.

Instead, families need to make communication about money a priority. Teaching kids about money involves sharing values and information and allowing children to have experiences that will result in independent, fiscally responsible adults.

Start by examining what money means to you personally. In other words, what is important about money—and why? The entire family can share in this discussion, addressing issues like coping with a parent who loses a job or making decisions about significant purchases. Particularly during a financial crisis, it’s important to have the entire family’s support. Of course, explanations should be age-appropriate where children are involved.

Preschoolers

Children this age can begin to learn about comparison shopping when they accompany you on routine shopping trips. They can count and identify coins, make decisions about small purchases and start using a piggy bank.

Experts advise parents to start their kids on a regular allowance around age 5 to 7; however, it should not be used as a means of control by linking it to chores (they are expected anyway) or withdrawing it as punishment. Using money coercively usually backfires. Instead, freedom to spend the allowance without strings attached helps children learn to handle money on their own. Parents need to be comfortable with the amount and timing of the allowance, and remember that consistency is important.

School-Age Children

School-age children can be given opportunities to earn extra money. They can participate in family discussions about money and benefit from learning where their parents’ money comes from: employment, investments, inheritance, etc. The use of checkbooks and credit cards merits explanation; they are a method of payment and do not represent an endless supply of the green stuff.

By ages 10 to 11, children can learn valuable lessons about how money works simply by opening a savings account. This includes everything from the discipline of saving to the compounding of interest. When a minor opens a bank account, a parent is legally responsible for it.

Time plays a key role in a person’s financial success. Let’s look at a hypothetical example: If an 18-year-old saved just $1 per day every day until he reached the age of 65 (a total of $17,000) and invested it aggressively, earning 15 percent per year, he or she would have $2 million for retirement.

Teenagers

Teenagers are good candidates for learning more about wise consumerism. They can research special purchases and participate in planning and shopping for meals and wardrobes. This is also a good time to engage kids in long-term financial goals such as saving for a college education.

Naturally, high-school students will want more money, and part-time work is the obvious solution. But work should not interfere with school. Each additional year of education represents the potential for thousands of dollars of extra earnings per year. Kids don’t have to work a lot of hours to benefit from this experience. In addition to having extra money, they gain a sense of earning power and all the responsibilities that go with holding a job.

Credit cards may be appropriate for particularly mature high school students, but parents should be aware that this could turn into a very expensive lesson on budgeting. A checking account may be a better alternative.

College Students

College students who receive a lump sum to cover tuition and living expenses for the semester will need to do some serious month-to-month budgeting. Even with the best planning effort, many will run out of money before the end of the term.

Remember, practice makes perfect. Address these basic financial planning concepts at an early age to establish a solid foundation for making smarter choices about money throughout life. These planning measures are invaluable: identify your goals; live within your means; spend wisely; and save and invest regularly.

Do you have questions about teaching money skills to your child? Ask Dr. Dave at www.https://drlowenstein.com/.