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Age-appropriate money lessons for kids K-12

Allie Johnson

February 3, 2014

Maybe you're not perfect with money – after all, who is? But you still can act as a financial role model for your kids, showing them how to save, spend and be smart about credit.

“Be aware that your own approach to financial management teaches kids a great deal,” says Daniel Hebert, director of professional development for the Jump$tart Coalition, an organization dedication to improving financial literacy for kids.

Yet not all financial lessons are suitable for all audiences. While honesty is important, it's crucial not to burden your kids or pile on more than they can handle.

“Make sure you don't put a burden on them and keep it age appropriate,” says Ellie Kay a family finance expert and author of “Lean Body, Fat Wallet.”

What your kids can absorb is determined, in a large part, by their stage in life, Kay says. Here's how to be a good financial role model for your child at different phases:

Toddler years

When your tyke sees candy or a toy in a store and says, “I want!” he has no concept of how mom and dad have to work to get the money to exchange for an item in a store. At this age, parents can model going to the store for a specific purpose — “We're going to the store to buy diapers today,” for example — and sticking to it.

“The sooner you teach them about boundaries in the store, the better,” Kay says.

Early elementary school

Children starting school can learn the difference between wants and needs, and they're watching their parents closely, Hebert says. So if Mom and Dad want a bigger TV for the Super Bowl, run out to Best Buy and put one on the credit card, the kids take note. Instead, have a family meeting and do the math when you want to purchase something.

“You can discuss, do we need to replace our TV? Can we afford it? And if we buy a TV, we might not be able to go camping this summer,” Hebert says.

Later elementary school

Kids at this age might start getting an allowance, so it's important for them to see you getting an “allowance” (your mad money) too, Kay says. Let them watch you make decisions about how to spend your discretionary funds, and make sure they see you saving money with deal apps and discount codes, Kay says. As a teaching tool, you can give each family member a certain amount to spend at the movies, a restaurant or theme park, letting everyone keep what they don't spend. Each family member might get $15 at the movies, for example. “Some kids might say, 'I'm not that hungry, so I'm just going to get this matinee ticket for $9 and save the extra $6,'” Kay says. “They learn the value of spending less than what they make.”

The tweens

At this point, your kids might be picking up additional chores to earn extra money and saving up for big items they want, Kay says. What can you do to help them get a closer look at the nuts and bolts of how money works? Let them sit in on family budget meetings and show them how you pay your bills and save up for big items your family needs or wants, Hebert says.

If you earn extra money yourself by running a home business, freelancing or taking on overtime, let your kids see you working and explain why you're doing so — whether it's to get out of credit card debt, save for a family vacation or pay for next year's holiday presents so you don't have to use credit, Kay says. This also is a good time to show kids that “a penny saved is more than a penny earned,” thanks to interest-bearing accounts.

High school

By the time they hit high school, kids should know that their main job is school, — but might have part-time jobs and savings accounts they're contributing to regularly, Kay says. During this time, parents should be modeling diligence and excellence in work, whether they're a stay-at-home parent or the CEO of a corporation. Let your kids see how hard you work and how you get recognized and rewarded for that, Kay recommends.

For example, you could say, “'I got a raise. What this raise means is we can pay off the credit card and that we have enough money to go to Disneyland,'” she says.

High school also is a good time to add your teen as an authorized user on your credit card, allowing them to purchase only needed items, such as textbooks or gas, and carefully monitoring their purchases, Kay says. Let them log in to the account to see you using credit responsibly, charging monthly expenses like groceries and paying the card off each month, Kay says. If your child uses the card for, say, Starbucks lattes instead of school supplies, you can take the card away.

“They see that and it shows them responsible habits,” Kay says.

Plus, by adding your child as an authorized user to your credit card, you are helping him or her build a credit history early. Provided that you handle that account responsibly by paying on time and keeping a zero or low balance, that positive credit history will be reported to the credit bureaus in both your names. Then, down the road, your child will be ahead of the game when it comes to applying for a loan for a car, getting an apartment or even his own cell phone. However, if you run into trouble with card payments, it would be in your child's best interest to be removed from the card immediately so that any negative information on the account doesn't impact your kid's credit.

Tips for all ages

No matter how old your kids are, use these tips to make sure money lessons stick.

Explain what you're doing. Your good financial habits will make much more of an impact if you talk to your kids about your tactics, Kay says. For example, if you need to buy school clothes and you hunt down an Old Navy discount code, you might say, “Look, Mommy just saved $10.” 

“If we never tell our kids what we're doing, they're not going to understand,” Kay says.

Be honest and open. It's OK to tell kids about the areas where you're less than perfect, Kay says. For example, if you're a born spender, you don't have to try to pretend you're a natural saver. Instead, share your challenges.

“You can say, 'I really want to spend this money, but I'm not going to because I want to pay off my debt and I don't want to argue about money with your daddy,'” Kay says.

Be willing to learn. In areas where you do fall short, your finances likely are a work in progress — so plan to learn right alongside your kids. “It's kind of a dichotomy,” Kay says. “On one hand, we're role models but on the other hand we realize our areas that still need work.”

Do an attitude check. It's important to take a lighthearted approach to finances and show kids that saving can be fun, Hebert says.

For example, say you and your spouse decide to save money in a restaurant by ordering one entree. Your kids will get the wrong message if Dad rolls his eyes and grumbles, “Yeah, we're gonna split a meal,” Kay says.

“It's your attitude about saving money that's really going to make a huge difference,” she says.

Don't fight about money. Finally, and most importantly, you don't want to create family tension around finances.

“The kids don't need to know you've got $8,000 in consumer debt and it's all you and daddy argue about all the time,” Kay says.