Teaching children about money through the years

By Darren Brown

2 Timothy 4:1-4 I charge you in the presence of God and of Christ Jesus, who is to judge the living and the dead, and by his appearing and his kingdom: ² preach the word; be ready in season and out of season; reprove, rebuke, and exhort, with complete patience and teaching. ³ For the time is coming when people will not endure sound teaching, but having itching ears they will accumulate for themselves teachers to suit their own passions, ⁴ and will turn away from listening to the truth and wander off into myths.

There are a number of money lessons that financial experts alike agree may help children improve their knowledge from an early age through high school graduation and beyond.

Ages 5-9

1. Have frequent “money talks. Start to introduce some basic concepts such as what money is used for, how we earn it, and how much items cost when children are in kindergarten or even earlier. “Money is a practical tool in life, so don’t let it be a mysterious concept,” said Jennifer Seitz, director of education at Greenlight, a banking and investing app for children and teens. “At an early age, kids are developing their ability to focus and prioritise, as well as understand the trade-offs you’re making to choose one thing instead of another.” Choose a “money word,” like earn, spend, or save, and explain how it works in your daily life as you go to your job, the supermarket, or put some money away for a memorable family outing.

• Discuss needs versus wants. Ask a child what they need and what they want to help them learn. At the supermarket, explain how you should think about using money responsibly by spending money on needs first, then wants. So, for example, you put eggs, milk, and bread in your cart before picking up candy, a toy, or stickers. Let your child know that there should always be a plan for how money is used. Buying items on a whim is a luxury for when you have extra money.

Ages 10-14

• Discuss ways to earn money. Help your child come up with ways to make money so they can start saving towards their goal. If you have the ability, give your kid an allowance or pay them for doing certain chores around the house. “Allow them to earn money and pay for extras,” Seitz said. “Chores teach kids life skills.” Designate how much a chore is worth so they know how much of your money can be allotted for a goal they’ve chosen.

• Follow a budget for favorite grocery items. Go grocery shopping with a specific budget for the items your household needs and include some of your child’s favorite or most-used items. Send your child or children to a specific aisle to grab a handful of items, including some of their favourites. Tell them to keep the items under the budgeted amount and look at the “unit price” to make sure you are getting the most cost-effective items to get the best deal. Help build their confidence and give them a sense of financial responsibility by having them live within their means.

• Choose a charity and give. Once your child starts making a little bit of money, teach them the importance of tithing and helping others through charitable giving. Have them choose the charity. Giving can be in the form of money, food, clothes, or spending time with others.

Ages 15-18

• Help your teen buy stocks, not just brands. Teens may be more interested in brands than their parents, so introduce them to the idea of owning stock in a company they love.Open an investment account so they can learn the ins and outs of owning stock at an early age. You can give your teen hands-on experience with investing by purchasing a fractional share of a company, a mutual fund, or an exchange-traded fund for as little as $1.”The secret to building wealth isn’t so secret; it’s investing,” Seitz said. “The longer investments are earning returns, the more money they can earn.”

• Encourage your teen to save and invest. Encourage teens to start flexing their savings muscles by working a summer job and setting up a savings account or a retirement account. “Offer to match their savings as a parent or godparent, up to a certain percentage, much like most employers when it comes to defined contribution retirement plans,” said Deri Freeman, a certified financial planner at Prudential Financial in the Washington, D.C., area. “This will incentivize them to save for long-term goals and help them build the habit of saving early on.” Just make sure they are putting money in cash savings for a “rainy day” as well as investing their money, too.

Contribution from Sharon Epperson, CNBC Senior Personal Finance Correspondent