Most parents think the “birds and the bees” talk will be the hardest conversation with their children. But equally as difficult, as well as complex, is the discussion about the value of money.
According to certified financial planner Tracy Redmon of Ameriprise Financial, it’s never too early to start “incorporating your values about money” to your children.
“The first best place to learn about money is at home,” says Redmon. “Involve your children early…it will help them for the rest of their lives.”
Here is what you should be discussing with your kids at different stages in their life:
Ages 5-8: Begin explaining the concept of money. Once children can count, it becomes easy to relate that skill to money management. When out shopping, let your child count the money and hand it to the cashier. Ask your child questions at the grocery such as, “Which one of these is cheaper? What can we buy with $5?” Encourage them to start saving coins in a piggy bank and count their savings.
Ages 9-13: Help them understand where money comes from. Explain how you make money and what you do with the money you earn. Let them go through the process—take them to the bank to deposit a check and let them help pay the water and electricity bills. Explain how it’s important to share money with those less fortunate and include them in this process. It’s also a great time to have your child start his or her own savings account. Most banks and credit unions offer this with no fees and no minimum deposit.
Ages 14-18: Help them find a part-time job doing something they enjoy. Instead of giving them an allowance, tie the allowance to the completion of certain jobs around the house. Give bonuses for good grades or good behavior. Offer to match their savings (the idea is to provide an incentive just as an employer might do in the future). Use real money, even if it’s a small amount, and teach them how to invest it and about the power of compound interest.
18 and beyond: Although they are no longer children, they still look to you as a role model, especially in money matters, says Suze Orman, financial expert and author of The Road to Wealth. “Parents, I know you want the best for your children,” she says. “Children who watch parents do stuff like ring up huge credit card bills buying goodies and vacations they can’t afford tend to dig the same financial holes themselves as adults.”