Financial lessons learned early in life can prevent financial pain later in life .if parents never teach their children financial responsibility in at least some capacity then somebody else will.
That’s why teaching kids about money should begin at an early age. It’s important to show children, even as young as 2 years old, that things cost money and there is a value in the things you buy.
According to debt.com , It’s important to start money lessons for children early. But you can start small. You don’t have to go straight to addition and subtraction, or even costs. This is not to say that you can’t go beyond the scope. Just keep in mind that some concepts can’t and won’t be grasped if you try to teach them too young.
Let the kid know how much stuff costs money
According to daveramsey.com , Once your child is beyond the stage of putting things in their mouth, around age 5, you can start introducing actual coins and dollar bills. Play money is good for this, too. Again, start small. They don’t understand the difference between the value of a penny and a quarter, just that it is all “money.”
You have got to do more than just say, “That pack of milk costs $5 son.” Help them grab a few dollars out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.
Saving for college
You need to started explaining to our children at a young age the importance of saving for things they wanted. you need to started explaining this using non-monetary lessons.
There’s no time like the present to have your teen start saving for college. Do they plan on working a summer job? Perfect! Take a portion of that (or more) and toss it in a college savings account. Your teen will feel like they have skin in the game as they contribute toward their education.
The 3-piggy banking system for kids
Age 3 is also a great time to introduce a piggy bank. Some parents break it down even further and set up a three-piggy bank system:
One little piggy is for saving, The second is for spending, And the last one is for charity.
This can be altered and set up for just saving and charitable giving as well. Begin the concept of the piggy bank by offering them change for a chore they did well or the change from a trip to the grocery store if they were well-behaved. Have them count the number of coins and separate them by the way they look. This will be helpful when teaching them the different values of the coins.
Around age 5 you can begin to teach them about the individual coins and what they are worth. Make sure that each lesson is fun and not made to be overly complicated or daunting. This could lead to negative feelings about money and potentially poor money habits in the future.
Give them the responsibility of a bank account.
By the time your kid’s a teenager, you should be able to set them up with a simple bank account if you’ve been doing some of the above along the way. This takes money management to the next level, and will (hopefully) prepare them for managing a much heftier account when they get older.
Teach them the danger of credit cards.
As soon as your kid turns 18, they’ll get hounded by credit card offers—especially once they’re in college. If you haven’t taught them why debt is a bad idea, they’ll become yet another credit card victim. Remember, it’s up to you to determine the right time you’ll teach them these principles.
Help them figure out how to make money.
When you think about it, teenagers have plenty of free time—fall break, summer break, winter break, spring break. If your teen wants some money (and what teen doesn’t?), then help them find a job. Better yet, help them become an entrepreneur! These days, it’s easier than ever for your teen to start up their own business and turn a profit.
Start introducing financing, credit and income earning at age 15-18
Teaching kids about money; lesson should be more advanced for teens Will your child drive or do you live in a city that has options other than cars for transportation? It makes things easier if you live in a place like New York City where there are myriad forms of public transportation for your kids to get around.
Children often think of getting a car when they turn 16 or 17, but most families can’t afford that kind of expense. However, if your child has saved up, there might be some opportunity to get some kind of reliable used car. You can potentially consider offering to split the cost or pay for insurance.
Reinforce health money habits at ages 11-14
This is really the age to start reinforcing the money habits you taught your children earlier on. Make sure chores are done and allowances are earned. Have them start using their money to buy the things they want instead of you making these purchases. This is one of the critical points of finance for kids, making sure they understand that the things they want cost something.
Expand on the idea of earning money outside the home with babysitting, washing neighbors’ cars or cleaning their yards, etc. Making more money is a perfect opportunity to discuss again the idea of saving, spending and helping others through charitable giving.
Introduce them to the magic of compound interest.
We know what you’re thinking. You can barely get your teen to brush their hair—how in the world are they supposed to become investment savvy? The earlier your teen can get started investing, the better. Compound interest is a magical thing! Introduce your teen to it at an early age, and they’ll get a head start on preparing for their future.
Teach them contentment.
Your teen probably spends a good chunk of their time staring at a screen as they scroll through social media. And every second they’re online, they’re seeing the highlight reel of their friends, family and even total strangers! It’s the quickest way to bring on the comparison trap.
Stress the importance of giving.
Once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well.
Show opportunity cost.
That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes.
Have kids make their own payments.
You may help your child get a loan or credit card, but before you do, make sure your child knows he or she will be responsible for making the payment. Talk to them about making choices they can afford, and impress upon them the fact that they must make regular payments. My parents made it clear to me that if they ended up making the car payments, I would no longer have the car to drive.
Be clear about interest.
This is very important in terms of credit cards. Show them interest charges on credit card bills. I have saved some of my old credit card bills — from the days when I was somewhat careless of carrying balances — to show my son when he’s older. Point out that interest doesn’t provide any return value. All it does is make someone else rich. Point out that credit cards represent someone else’s money, and that this is why they should pay off their balances every month. Even if you don’t get your child a credit card, this is still an important lesson to teach. Who knows what he or she will do later on.
Do some math.
Older kids are big enough to start learning about the actual math of things like compound interest. Look up a good compound interest calculator, and run some scenarios. Look at how much they can save in 20 years saving just $50 a month. Then look at how much they’ll pay if they make the minimum payments on a car loan or student loan. Seeing the numbers laid out can be helpful for most kids.
Give them responsibility.
If kids are able to use their money for only what they want, they won’t likely have to make hard choices. You’re providing for all their needs. So they just have to decide which toy, video game, or designer whatever they want next. But you can help them become more financially responsible if you put some of the onus on them.
For instance, give them part of their clothes spending budget for the year, but make them responsible for their own back to school shopping. If they make some mistakes, let them. They’ll figure it out. And it’s better that they do this now than when they’re in their twenties with a lot more than designer jeans at stake.