In today’s society where the consumer is king, at what point do we address the spending habits of our children? Few schools offer financial education, but parents can teach their children about the importance of sound money management.
University of Florida researchers say children should be introduced to the concept of money between the ages of three and five. Have children handle money so they can see and understand it. Begin teaching them that two nickels equal a dime, five nickels equal a quarter, and more.
Children should not have allowances until the ages of six to eight. Researchers say the amount of an allowance should be based on maturity of the child and the budget of the family. Also, do not tie the allowance to household chores. Instead, offer children money in addition to their allowance for completing extra, age-appropriate activities around the home such as cleaning the garage or mowing the lawn.
During the pre-teen years, parents should help children develop a spending plan. Teach them how to save and spend allowances based on their plan. This is also a good time to open a savings account and show children that a dollar deposited today will be worth more in a year. They can begin to understand risks and rewards related to saving and investing.
Introducing children to money at an early age can help increase financial understanding, making the transition into teen years (when they will have control of their own money) easier.
