Once a child can walk and talk, they’re generally old enough to learn a few rudimentary money lessons. As the child gets older, their financial lessons will become more and more complicated. Kids learn by example and by listening to their parents, too. In the interest of happy families everywhere, we’re delighted to present the following age-appropriate finance lessons you can teach your kids.
Money concepts kids should know by kindergarten
Little kids seem to have a rather magical way of thinking about money. In fact, toddlers will believe that money grows on coconut trees, if that’s what their mother or father tells them. As far as most two-year-olds are concerned, mommy and daddy visit magic cash machines that dispense dollars at the swipe of an ATM card. The sooner your children understand how money really works, the better. So say finance gurus at Parents magazine.
By the time your child is old enough to go to kindergarten, they should understand several key concepts about money. First, kids need to know that things are exchanged for money. When they receive holiday gifts, someone probably paid for those presents. Pre-school kids can also learn that working is a way to earn money. Additionally, kids should understand the difference between wanting and needing an item and that sometimes, people have to wait to buy something that is not exactly necessary.
Money lessons to impart before your kid is in junior high
Sixth and seventh graders should have a basic understanding of savings accounts and compound interest, says US News and World Report. Fifth and sixth graders are generally old enough to have a bank account co-signed by a parent. This is a dandy way for kids to learn how earned monies and monetary gifts from grandmas can be tucked away for a while and withdrawn after amassing interest.
Sixth grade can be the right time to start giving kids an allowance. Some parents base allowance on chores, other moms and dads prefer that kids participate in household duties without expecting payment for the same. Either way, a small allowance helps kids learn to build a budget and save for things they want.
Lessons about credit, loans, and repayment
If you plan to take out a small personal loan in anticipation of a holiday or vacation, allow your high-school age kids to observe the application process. Remind them that it’s crucial to read and understand the fine print in a loan contract before signing. You can use this link to visit a fair loan site with your teenager.
Although minors are not typically allowed to open a credit card account by themselves, parents may add a responsible teen as an authorized card user. Understanding interest rates, service fees, and spending limits will stand your teen in good stead when they’re adults. When teens see how making minimum monthly payments is not the best way to go, they may grow up into adults who use credit wisely.