Last week, we featured Part 1 of this article about ways you can teach your kids about money and help them develop a better understanding of personal finances at an early age. In that article, we covered some lessons you can share during the early developmental ages of 3-10. In Part 2, we will talk about the adolescent ages of 11-18. This is when you can really start getting into more complex financial concepts as they prepare for adulthood.
By this age, you can start getting into more complicated concepts of money and personal finance. It’s a great time to help them set up their own savings account at the bank and tell them why they want to keep their money there. You might even do some compound interest calculations with them and show them how their money can actually grow over time in an interest-bearing account.
Have your children set up long term savings goals. They may have a more expensive purchase that they want to save up for, or maybe they just want to reach a certain savings amount in their account. Setting goals is a great way to keep a child motivated. They’ll learn patience and really begin to understand how money works on a more adult level.
By the ninth grade, you will already want to be talking with your kids about college. If they are not destined for school or military, then helping them understand how to manage personal finances as an adult becomes even more important. You may have your own savings goals, and you can involve them in important decisions. It will set realistic expectations about what you can afford and other options like student loans that may be available.
Lending is a major concept to understand by the time children reach their teenage years. If they borrow money, they have to pay it back. Student loans come with heavy interest fees and they can weigh on your shoulders for many years after college (in fact it’s a full-blown crisis these days), so they need to understand it’s not “free money.”
Of course, many teenagers will also get their first jobs, which is another important lesson in how to manage money. Because you are still paying for their basic living expenses (food, shelter, education, etc.), a lot of teenagers look at any money earned from a job as purely spending cash. Some of the lessons you teach them earlier in life (remember those 3 jars?) can come back and help them be smarter with the money they do earn.
These are just some specific ideas you can implement throughout the various stages of your child’s development. The important thing is to be open, honest and direct with them when it comes to financial issues. They more they see and understand about how money works, the better equipped they will be when they grow up and have to manage their own finances.
For help with your financial planning and saving for your children’s future (college funds, savings bonds, savings accounts, investments, etc.), contact Illumination Wealth. We’ll work with you to develop a financial plan that makes sense for you and your entire family.