Teach Money Habits at Any Age
By Private Vista on July 8, 2021
We’re halfway through Summer Break, and you may have already exhausted all those “Summer Plans” you had scheduled. Are you looking for ways to teach your kids life skills or add incentives to get out of the house? As a Wealth Management firm focused on Family Wealth Transfer, we understand the need to raise financially responsible children beginning with financial education as early as possible. Here are some tips to raise financially responsible kids at each stage of their life:
Ages 2 to 5
My wife and I began teaching our kids about money as early as age 2. We would give them our loose change, to then be put in their piggy banks. The exercise provided very little satisfaction but allowed them to visually see the money going somewhere while feeling the bank get heavier with each deposit. Today, they’re starting to understand that toys cost money. To which, their question is usually, “How many monies do I need to buy this?” As part of our counting exercises, we are practicing the different values of each coin and how those coins relate to value. For example, they know that four quarters will buy them one of anything at the dollar store (we’ll spare the tax conversation until later).
Ages 6 to 12
To this point, “work” is defined as a place Mommy and Daddy go to pick up the money. As chores become a part of your kids’ daily routine, it may be time to introduce an allowance as an educational tool. This strategy helps your kids understand where money comes from and how it can be used – saved/invested, spent, and/or given away. As their savings increase, I encourage regular visits to the bank to visually see where their money is held, and the role interest plays. In some cases, parents may choose to “match” their kids’ savings to encourage this practice.
Ages 13 to 16
As your kids transition from middle school to high school, their needs and wants will grow with them. The $50 scooter they had to have 5 years ago is now a $2,000 laptop. They’ll also have access to part-time and summer jobs that will give them their own money to be responsible for. When that first paycheck comes in, sit down and help them understand how their pay was calculated and the various deductions and taxes. Once they learn to drive, help them understand the costs of this responsibility – insurance, gas, and maintenance.
Ages 17 to 18
College choice is a big decision, with an even bigger price tag. Even if you have the means to pay the bill, cost should be part of the conversation. It’s important to understand why they are choosing a specific college and how it relates to their degree and future career.
Beyond any education tool, money habits are learned by observing you. I recommend sharing your financial knowledge with your kids to be better equipped for the world that awaits them. Most importantly, they should understand that money can’t buy everything, including love, health, and happiness.
Article By: Randy Porzel, CFP®, RICP®. Randy is a Partner and Lead Advisor at Private Vista LLC. He began his financial planning career as an intern and worked his way up through every job at the firm. Randy finds joy in taking clients through Private Vista’s planning process, using tools that answer questions and clear uncertainty so that clients can look forward to their idea of an enriched life. In his free time, Randy enjoys serving on the boards for the Chicago Lighthouse for the Blind and The Darien Lions Club, whose mission is to serve those in the community with visual impairments.
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