How To Make Sure Your Kid Knows How To Manage Their Money

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The following was produced in partnership with ‘Make Your Kid A Money Genius (Even If You’re Not)‘, a new book that will help you do exactly that. 

Money can be difficult to discuss with other adults, let alone with kids whose primary spending consideration is, “Is the thing shiny?” But you can, and should, start talking dollars and sense into your kids early so they can manage their own finances (and leave your basement) before age 30.

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To help ensure your kids get the message, meet Beth Kobliner, author of Make Your Kid A Money Genius (Even If You’re Not). She’s a former Money magazine staff writer who served on President Obama’s Advisory Council On Financial Capability For Young Americans. Consider her a financial advisor for your investment in your kid’s future as you read some of her favorite tips for you to help make your kid money wise.

When To Start Giving Chores And Allowance

Keep money talk age-appropriate. Kids as young as 3 can understand basic money concepts, but your toddler can barely say “House” — they don’t need to know how you finance yours.

One thing to start early is chores. Research shows participation in household chores is a predictor of future success. “Tiny kids as young as 18 months can dip their toes into family chores. Let them!,” says Kobliner. If you’ve ever cleaned anything in front of a baby, you know they want to join. They’re terrible at it, but watching them “help” is damn adorable.

On allowance, some studies show it prepares kids for their financial future while others say the opposite. “If you’re going to give allowance,” says Kobliner, “make a plan and be consistent.” You also want to avoid merging the 2. Chores teach responsibility and helpfulness, but they’re meant to be part of everyday life. Linking them to allowance ends with you negotiating every LEGO cleanup or, worse, your kid deciding $5 isn’t worth their time to put them away. Your feet can’t take that chance.

How To Teach Kids About Spending

Preschool

  • Teach Them “Wants” Versus “Needs.” On your next grocery run, explain that needs, like vegetables and milk, go in the cart, while wants, like cookies and cereal with cartoon mascots, stay on the shelf. Unless dad wants dessert.
  • Suppress Advertisers’ Influence. Limit screen time, which floods kids with ads. When they do see commercials, be straight with them: Don’t believe everything you see; actors get paid to smile while eating that burger.

Elementary Shool

  • Invite Them Into The Process. Be open about family budgeting, like so: After everything you need we have enough for a vacation or a new bike. Not both. And explain big-ticket purchases: The minivan beats the convertible because we need adequate storage for soccer balls and orange wedges.
  • Let Them Make A Tough Spending Choice. When they want a $100 pair of flashy sneakers, give them a $100 gift card to the sporting goods store instead. Odds are they’ll come home with a $50 pair, a ball, a water bottle, and a drills DVD.

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How To Teach Kids About Saving

Preschool

  • Start A Cash Jar. By age 3, kids get that money has value. They just don’t understand how to store it. Have yours drop their dough into 3 jars labeled “Future,” “Now,” and “Share.” Allocation doesn’t matter — the jars instill the habit of saving and literally stashing cash.
  • Make Them Wait. Use waiting to teach the value of long-term planning. While in line for the slide, remind them it’s only fair because the other kids will have to wait for them to go. Hype birthday party games and themes for months, then, on the big day, remind them how worth the wait it was. Kids can’t argue with cake and presents.

Elementary School

  • Employ A Rule Of Thumb.Rules of thumb create good habits that are automatic, like Buckle your seatbelt, Brush your teeth, or If it’s yellow, let it — never mind. When it comes to saving money, “Save a quarter for every dollar you get” is Kobliner’s favorite.
  • Go To The Bank. Sit with your kid while a bank employee helps them open their first savings account. Interest them in earning interest (just say: “Free money”) and, if you can, create a matching program to encourage them to save. While you’re at it, ask HR about your 401(k).

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How To Teach Kids About Investing

Preschool

  • Read ‘The Little Red Hen.’This fable introduces the concept of investing time and effort into something — and not sharing when freeloading farm animals try to mooch off the spoils. Foghorn Leghorn accent optional.
  • Plant A Seed. Make a little garden or flower pot and discuss the investment of time, effort, and care required to grow a sunflower, tomato, or alfalfa sprout. Actually, nobody likes alfalfa sprouts. Stick to the others.

Elementary School

  • Explain Stocks Using Their Favorite Things. Next time they eat a snack, explain that everything they like is made by a company, making stuff costs companies money, and companies get money by selling stock. When people buy stock, they own a bit of the company — their investment. Knowing that, Junior might think a little harder about their next ice cream man purchase.
  • Play The Lottery. Let your kid learn the hard way about “getting rich quick.” Have them play the next huge jackpot drawing with their own money and when they lose, explain they never actually had a chance (okay, one in 250 million) and would have been better off investing. If they do win,* have fun on your yacht.
    *They will not.

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How To Teach Kids About Giving

Preschool

  • Donate The Share Jar. Studies show young kids can experience the joy of giving but they’ll need your help. Try asking them the one thing they’d change in the world. Then drill down to a worthy recipient of their “Share” funds and do your best to explain the connection.

Elementary School

  • Show Them Time Is Money. Volunteering shows kids cash isn’t everything, and the impact of the activity increases if the whole family participates. Explain why giving matters. Double all of the above during the holidays.
  • Make It A Habit. Establish traditions around giving, like giving gifts on their birthday as well as receiving or following the “Get one, give one” rule for new things. By not telling them what to give, you’re giving them the gift of agency. Feel amazing yet?

Mind The Gap

One more thing kids need to know about money: girls are part of the conversation, too. Research says parents are more likely to discuss finances with sons than daughters, resulting in boys saying they’re more confident about money. “That’s insane, especially considering women still get paid about 80 percent of what men make,” says Kobliner. “Our girls are going to have a lot more work to do to keep up financially.”

You don’t have to be a finance wiz yourself to raise the next Oracle Of Omaha (or whatever alliterative nickname suits your hometown). It just takes some common sense tips and practical, real-world lessons. If that gets you wondering why you pay a financial advisor, remember, you just admitted you’re no wizard. Your alternative is saving your money in a piggy bank, and even your toddler knows better than that.

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