Educating Your Children about Money; Part 1 The Timeline

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Educating Your Children about Money; Part 1 The Timeline

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You have the ability to enable your children to be empowered by money - or terrified of it. To manage their finances confidently, or chaotically. Even if you're not the best with your own finances, you owe it to your children not to pass along bad habits and fears. Here is a simple outline to ease your kids into managing -and even enjoying - the family finances.

Age 3-5: Toddling Off With the Coins

As soon as the kids take an interest in those bright shiny coins, start to educate them as to the value of each coin and give examples of what they can buy. As they learn math, adding and subtracting coin values can be a fun way to practice.

Age 5-7: Take it to the Bank

As soon as your child is old enough to understand the concept of having a bank account, open one up for them. Many families use them to deposit monetary gifts from family members and special bursaries. Be sure to discuss how bank accounts are interest-bearing, and how their money is earning money when it's in the bank.

Age 7-10: Put it in the Budget

As they continue to learn the value of a dollar and what it can (or can't) buy, encourage them to create budgets for items on their wish list. If they receive an allowance, encourage them to save a percentage of it towards their desired purchase, and to calculate how long it will take based on what they're willing to save. Seeing a budget on paper creates a different level of comprehension around managing finances, making it a little more tangible.

Age 10-13: Earning More

If your child is extra motivated by their budgeted purchase and wants to get there faster, maybe they can work some "overtime" for you in exchange for some additional income (assuming it doesn't get in the way of homework, of course).

Age 13-16: Investing

Before unleashing your children to the wolves of finance, you'll want to arm them with knowledge of different investments. Once they grasp the concept of interest and the delayed gratification of earning money with money, you can show them how other investments work (like stocks, mutual funds, term deposits, and bonds). This is a perfect chance to discuss the concept of calculating risk in investments and the risk-reward factor. If a thorough asset allocation conversation is beyond you, ask your financial planner if they'd be willing to explain a few terms to your kids during your next meeting.

Try setting up a game where you track the stock prices of companies the kids are familiar with (like Coca-Cola or Disney), to get them into the mind frame of long-term investing without putting their hard-earned dollars on the line just yet.

Age 13 and up: Part of the Family Finances

The best way to instill a healthy relationship with money in your kids is to be open and practical about your own finances. Make budgeting a family exercise, and a forum to be contributed to by all parties. By budgeting and planning out a family vacation together, each family member will take pride and ownership of the trip. They might even ease off the constant request for souvenir cash, if they know the budget in advance!

Obviously the ages stated in this guide are rough. You'll know best when to introduce each new money milestone. Even though you may not be the most confident with your own money, don't let it show; money doesn't have to be a scary thing, and the sooner your children learn that, the better off they'll be financially - for the rest of their lives.

Stay tuned for some more tips on educating your children about money in the next of this two-part series!

Related Links:

Setting Financial Goals You Will Achieve

Putting Your Finances in the Blender

Family Time and Weekend Activites on a Budget

Nora Dunn

Nora Dunn is The Professional Hobo: a full-time traveler and freelance writer. She is a contributing writer under Life Balance. Having sold her business and belongings to travel, she has been on the road since 2007. She travels in a financially sustainable manner, taking advantage of creative volunteering positions while constantly balancing life and her location independent work on the road. As a former certified Financial Planner, she is financially responsible for her actions along the way. She believes there is a fine balance between planning for tomorrow, and living for today. Compensated CareOne Blogger.

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  • This article will deepen the timeline by giving you some additional tips to ensure your kids have a healthy relationship with money, right from the start.

  • I am no expert, but my experiences with debt have left quite the impression on me so I have a pretty strong opinion on doing what we can to better prepare our children for the responsibility of managing personal finances.

  • We obviously don't want to deprive ourselves of a cultural or otherwise special experience abroad, but we also don't want to return home with the worst souvenir of all: debt we can't afford.

  • Is managing finance not a passion for you? An onerous task you'd prefer to ignore than attend to? No problem. Here are nine ways to automate your finances so you can focus on other things in life.

  • Thanks for sharing!!

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