Teaching Kids about Money
It's never too early to start teaching your children about money. Even preschoolers can begin to understand money concepts by playing pretend store or restaurant games.
Money lessons for five-year-olds
At age five, you can teach your child words like savings, bank, check, bills, and trade-off. A piggy bank is an easy way to demonstrate how the child can save for something that he or she really wants. Make a game of it; count the coins once a month, and create a chart showing how close they are to their goal.
When bills come, show what the family receives in exchange for payment. Explain that a trade-off is deciding not to buy something right now so that you can save the money to buy something that you really want later on.
Teaching 10-year-olds about money
When children are 10 years old, you can teach them about interest, loans, credit cards and taxes. Take buying a car for example. Explain that the sticker price on a car isn't actually what you pay to buy the car.
If the family is saving up for a vacation, explain that the time horizon is the length of time that it will take to save the money that's needed to go to Disney World. When you go to a store, show them the tax that's added onto the receipt.
Teaching 15-year-olds about money
By age 15, your teenager can learn about investments, retirement savings and compound interest. As they start to think about college, financial concepts will be more real to them and they can begin to pay closer attention to the money they earn, save and spend.
These early money lessons could help your kids make smarter financial decisions and avoid costly mistakes in the future.