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A common question for parents may be, “At what age should I begin teaching my children the value of money- earned or gifted?” University of Illinois Extension specialists have compiled a list of the top things children should know about money by the time they reach middle school. We’ve added money concepts for ages 16 and up from the Teaching Children Money Management publication and broke them out, by age, below.
Concepts for age 3-5 years
1. You need money to buy things. Identify coins and their value; Discuss how you may value something that is free, such as playing with a friend; Identify items that cost money, such as ice cream, gas for the car, or clothes.
2. You earn money by working. Describe your job or that of your spouse to your child; Walk through your neighborhood or town and point out people working, like the bus driver or the police officer; Encourage your child to think about how he or she could earn money by setting up a lemonade/cookie stand or selling a service.
3. You may have to wait to buy something you want. When your child is looking forward to a favorite holiday, point out that sometimes we have to wait for things we want; Find three jars (or cans) and label one for saving, one for spending, and one for sharing; Suggest your child put some of the money she gets into the saving jar, so she can buy a toy or treat when she has saved enough. Also, some toys aren’t always as exciting once you get home.
4.There’s a difference between things you want and things you need. When you are out shopping, point out essentials such as food and clothing, and ask your child to describe items that he may want but are optional; Talk about how your family decides what to buy and what to pass up. Which is more important, buying cookies or fresh fruit? Soda or milk? Draw a circle and divide it into sections to show how money earned is a finite amount and must cover expenses.
Concepts for age 6-10
1. You need to make choices about how to spend your money. Include your child in some of your small decisions. For example, at the grocery store, explain why you pick one item or another; Give your child two dollars and let her choose which fruit to buy; When shopping with your child, ask yourself aloud: Do I need this item? Can I borrow it? Would it cost less somewhere else?
2. It’s good to shop around and compare prices before you buy. With your child, compare prices for a particular toy at various online or brick-and-mortar stores; Use coupons and discount cards and show your child how much you are saving. At the grocery store let show your child how to pick out the least expensive item.
3. It can be costly and dangerous to share information online. Know the websites your child visits; Know how to use parental control software to block inappropriate sites; Whether playing a game or shopping for toys, make it a rule that your child never gives out any personal information, like birthdate, address, phone number, etc.; Make it a policy that nothing can be purchased online without permission.
4. Putting money in a savings account will protect it and pay you interest. Discuss with your child how money in a savings account is protected by federal insurance so if the bank goes out of business, you will still get your money back; take your child to a bank or credit union to open an account in their name. Also, the money you put in the bank won’t be the exact same cash and coins when you take it out.
5. You should save at least a dime for every dollar you receive. Encourage your child to always save 10% of the money he gets; Some parents may also encourage donating to a charitable organization; Have your child set a goal to buy something he wants, and have him work toward that amount. Your child should be expected to pay for his own extra things like a toy or treat.
6. Entering personal information, like a bank or credit card number, online is risky because someone could steal it.Explain that cyber thieves can use Social Security numbers or other personal information to open credit card accounts or create fake ID’s; Train your child to look for the closed padlock used on secure sites.
Concepts for age 16
1. With more opportunities comes more responsibility. You child should have to pay for the gas they use in the car with their allowance. And if they want more money they will have to earn it.
2. You child should have a reasonable idea of your family’s finances.Help them understand the costs of living to prepare them to have realistic expectations for when they leave the house.
3. Save money now for upcoming expenses.Help you child understand the need to save money for college and even for some high school expenses like a class trip.
4. They should have basic money management skills.How to track and categorize expenses, set up a basic budget and stick to it.
Teaching your children key concepts about earning, saving and spending money is a smart move to save your child from developing poor habits to be carried into adulthood. See the University of Illinois Extension article here. See Teaching Children Money Management publication.
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