Good Money Habits for Children: Tips for Raising Kids’ Financial IQs

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We all know that money’s important. It makes the world go round and all that, right? Money is one of the most important things everyone needs to understand, yet it’s not something covered much by schools. They’ll help out with the math, but everything else is largely on our shoulders.

After all, we don’t all have the same financial circumstances and how we spend our money is often linked to our values and personal priorities. Still, there are some things that are generally true for everyone:

  • Like many traits, the basis of our money habits are probably formed much earlier than most people think.
  • You are the most influential model your children will ever have for how to deal with money.
  • It’s never too early to start teaching kids about money.
  • It’s also never too late to instill good habits and break bad ones.

Knowing that, here are some things worth considering to help our kids do well with money:

Very Young Kids (2+):

Teach them the names of coins. Give them piggy banks. Practice their numbers with money. PLAY. Play stores, grocery markets and restaurants can be a great way for kids to start learning about money. When you take them to the real things you’ll be able to talk to them about choices and what’s going on and they’ll have their play experiences to help them understand.

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Elementary School (6+)

The traditional kid’s first bank account is a good start. I once told my son I wasn’t going to buy something because it cost too much money and he promptly “reminded” me that I could always get more money from the bank. Tracking how money goes in and out of their own bank account will give them more respect for yours.

This is also a good age to start on the idea of saving for things we want. Do try and ensure the goals will take a reasonable time to reach. Waiting for months will lead to frustration. If they want a big ticket item that you would normally be willing to buy, consider having them save for a part of the cost.

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Older Kids (13+)

Compound interest, investing and credit. Start with concepts, but consider getting into some real-world safe investment options such as bonds or GICS. Go back to play: help your kids learn about index-linked funds, mutual funds, and stocks by “investing” imaginary money in real world companies and financial products. The whole family can join in and follow your “investments” through financial news and websites.

Now is the time to consider longer-term savings goals. It’s also time to start explaining the dangers of poorly managed credit. Too many young adults do severe damage to their future financial options by mismanaging their early forays into credit cards.

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All Ages

Get your children involved in the family finances. Even very young kids can help decide what fruit to buy. Make shopping lists and cut out coupons together. Compare the prices and quality of different brands together. Let your children help decide which charity to give to. The end goal is for our children to be thoughtful about money and know it neither grows on trees, nor comes freely from ATMs for anyone with a magic card.