Article
Years ago, Abacus’s Founder, Cheryl Holland’s 13-year-old daughter asked to manage her own clothing budget. Cheryl knew she had a teachable moment, but dollars and clothes and a teenager raised any number of worries. Cheryl had visions of watching her daughter walk to school wearing flip flops in the winter a er spending sensible shoe money on a party dress. Together, they set a budget and created a list of items to purchase from the budget. Of course, the 13-year-old made mistakes, such as purchasing pricey jeans that she outgrew within the year (with no parental rescue for new ones).We all understand that mistakes have value, especially for children. Cheryl’s daughter became savvy about shopping sales, gained confidence in her financial skills, and, most importantly, the family had more meaningful conversations about money.
I, too, am anxious that my children develop the skills to have healthy money habits as adults; where do I start?
Abacus recommends thinking about developing your children’s financial skills in age-appropriate stages. As Joline Godfrey discusses in Raising Financially Fit Kids, match the 10-basic money skills listed below to the developmental capacity of your child. Godfrey’s book provides guidance on responsibilities and practical activities for each stage.
Stage 1 (ages 5-8)
Children are learning about sharing with others and the difference between right and wrong. Children can count dollar bills and coins. They can understand the purpose of money and can perceive the difference between needs and wants.
Stage 2 (ages 9-12)
Children are changing in many ways. Children can make change and balance a checking or savings account. Children can understand what items costs vs. how much money they may have in their bank account. Children can make value decisions around purchases.
Stage 3 (ages 13-15)
Children begin to learn to think independently. Children begin earning money at this age and can understand their bank statements and interest earned in savings accounts. Children learn to compare prices to save money on one item so that they can spend more on another item or put more money towards saving.
Stage 4 (ages 16-18)
Children can think more logically and plan thoughtfully. Children can read and understand their paycheck. Children can link their goals to savings. Children understand investing basics.
Should my child earn an allowance or receive an allowance; what is your professional perspective?
Parents achieve the highest success teaching their children valuable money skills when parents provide an allowance which is not tied to chores or behavior. Allowance is a tool to help children learn about finances. Parents should determine what amount of allowance they deem appropriate at each of the stages. Children should be guided to spend, save, and give some of their allowance each week or month. Whatever decisions children make about their allowance is theirs to make. Not making smart decisions during these stages will help strengthen their financial skills.
Creating a plan to empower children with strong financial habits can be a daunting and overwhelming task, especially if your parents did not teach you about finances. But with guidance and care, each family can create financial literate children.
- How to save
- How to get paid what you are worth
- How to spend wisely
- How to talk about money
- How to live within a budget
- How to invest
- How to exercise the entrepreneurial spirit
- How to handle credit
- How to use money to change the world
- How to be a citizen of the world
