Ages five to seven:
By this age, most kids recognize the value of money and that it can be exchanged for goods. They also understand what income, or, earning money is. They are also capable of planning ahead and grasp the concept of delayed gratification.
An allowance helps kids understand that money is a limited resource and that once spent, its gone. Giving kids an allowance that increases as they age with a list of things that they now need to pay for out of their allowance (like candy or certain toys) gets kids used to making choices about how to spend their money. Generally, $1 to $2 per week is plenty at this age.
Ages seven to nine:
Teaching kids about delayed gratification and saving for a goal versus spending their money all at once as soon as its in hand will go a long way to helping kids develop into financially successful adults. Implement a rule that they need to save a portion of every allowance and then help them to figure out what they are saving for. Remember though, to a seven-year-old, the future is probably sometime next week, so it will only discourage or frustrate them if they delay the gratification for too long! After all, the lesson is really about getting a reward after the hard work of saving. If they seem frustrated that the money takes so long to add up, remind them they can boost the amount by saving birthday or tooth fairy money.
Ages nine to eleven:
By now, kids understand value and each time you shop with them you can show them how unit pricing works. Demonstrating that similar products are sold under different brand names often at different price points helps them to spot a sale or select the item that keeps more money in the family pockets. Clipping coupons can be a job, or chore, for them and as a reward, you can pass on a small portion of the savings on to them. Consider opening a bank account in the child’s name just for coupon savings – it can add up quickly and become quite the incentive!
Ages eleven to thirteen:
At this age, kids are ready to work outside the home doing babysitting, dog walking and yard work. And they can earn extra money at home like weeding or washing the family car – chores you might actually pay someone else to do. When kids work, they not only hold the money they’ve earned at a greater value, they may be more reluctant to spend it. This in turn can help them become more responsible, consuming adults.
Age thirteen to fifteen:
This is a great age to introduce the power of plastic. Kids see you swiping debit and credit cards for most purchases, so the next step is to include them when you reconcile statements and then write the check for the credit card bill. Help them to understand that there’s real money involved and that if you don’t pay up, interest will add up and then things can get out of hand.
Open a savings account they can use for their allowance and give them a debit/ATM card associated with the account. Then show them how to check their balance online.
Age fifteen to eighteen:
View college applications as a powerful learning tool as you and your kids work through their options about how much you can afford and how much might fall on their shoulders if borrowing is needed to make up the difference to cover costs. Show them how much monthly payments will be after graduation for college loans and encourage them to apply to schools at a variety of price ranges. Scholarships and financial aid packages can begin to look pretty attractive once reality sets in.
Age eighteen +:
Now is the time for serious budgeting. Help your kids by breaking down their budget into months and then weeks so they know how much money they can spend within a given time period. Resist bailing them out if they get into trouble…it’s hard to do unless something unusual comes up (like a car repair). Letting them adjust their spending to meet their budget will almost guarantee they will not call you every time they get into money trouble simply because they know you’ll come through.