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Kids and Money – Tips for Success

Posted July 21, 2014 by Kelley Long in Life After Five


A recent survey on teens and money revealed that 15 year-old Americans fall in the middle of the pack when it comes to understanding money and making basic financial decisions. While plenty of jokes have been made about teens and their age-typical behavior, it’s no joke if they are unable to understand what factors cause auto insurance to increase in price, how to read a paycheck stub or how to prioritize paying rent before buying new furniture, which is what the survey quiz tested kids on. These may seem like no-brainer things to many of us, but somewhere along the line we all had to learn these things.

Are you smarter than a 15-year old? Take the quiz

Even if you don’t have kids of your own, it should concern you that our young adults may not be learning the necessary skills to make proper financial decisions – this lack of knowledge and skills leads to adults who are prone to taking on more student loan or housing debt than they can handle and in extreme cases, has them turning to public assistance (aka our tax dollars) to survive financially.

Since personal finance classes are only mandated in seven states to date (17 states offer them, but they’re not required for graduation), it is vital to our economy that kids learn about money at home. If you’re not modeling good behavior for your kids, you may be setting them up for financial stress down the road. Here are some ideas for teaching your kids (or nieces and nephews) about money before they have to start making important decisions on their own:

Start early: As soon as kids learn how to ask for things (or throw themselves screaming on the floor of the grocery store, as the case may be) they can understand the concept that they have to wait to buy something by saving up for it. Instant gratification is a problem that plagues humans for life, but teaching kids how to delay it is a predictor of future success. Whenever your child receives money, have them add it to a jar or piggy bank. Every so often, help her count to see how close she is to her goal. Help keep her eye on the prize by explaining how much closer she is to reaching the goal with each addition.

Explain trade-offs: Once your child enters school, he is ready to learn that when you spend money on one thing, you’ll have less to spend on the other. Use grocery shopping as a way to demonstrate this. Give him a budget for his own treats, and then as he’s making his selection, explain how buying expensive yogurt might not allow him enough to also buy his favorite juice boxes. Share your own financial decision-making as you’re shopping for the household as well.

There are also a bevy of free web-based money games out there. Try the Great Piglet Challenge or Kids.gov for a variety of fun games. Heck, try them yourself – I’ve yet to conquer the Great Piglet Challenge!

Consider allowance: Whether or not you think kids should “earn” money through household chores or if you consider pitching in to be a part of family life, allowance is a great way for tweens to learn how to spend and save. At this point you can also explain how compound interest works. Use real numbers and say, “If you save $100 each year starting now, you could have $23,000 by age 65. But if you wait to save until you’re 25, you’ll only have $7,000.” This may make it easier to talk your tween out of buying a daily sugary snack at school and instead save the money toward a new video game.

Consider college costs: Whether or not you’ll be able to afford to send your kids to the college of their choice, discuss how their decision will affect you financially. If your child will require financial aid in order to pay for school, share your own struggles with debt as a way to explain the consequences of student loans. And don’t shy away from having them take a part-time job to save toward spending money in college. Understanding how hard it is to earn money will make them appreciate the value and think twice about blowing it all on beer and pizza. Just most of it…

Drive their own decisions: Once your teen is ready to start driving, instead of just handing her the keys and crossing your fingers she’ll drive safely, put some of her skin in the game too. My parents had me take care of my own car insurance when I got my first car, which was a great way for me to learn several money lessons. Instead of doing it for me, my mom had me call their insurance contact to ask to be added to the policy. The agent walked me through the additional costs and I handed over money to my dad each month to pay my share. If I was late or short paying, my car was parked until I paid up. I not only learned how to budget for my bill, I was empowered to take responsibility and when it came time for me to get my own solo insurance policy, I knew what I was doing. Thanks, Mom and Dad!

Most importantly, it’s vital to model good money habits for your kids. We all have our own money stories – our personal frame of reference based on our own experiences growing up around money. For most of us, the biggest influence in our stories came from our parents. Set your kids up for success by rewriting your own story to one of success and financial security.


About the Author

Kelley Long

Kelley Long is a CPA/PFS and CFP® who believes that the true meaning of financial security means having choices in life. She uses her 15 years of experience in various financial services industry jobs to inform her work as a Resident Financial Planner for Financial Finesse, providing unbiased financial guidance through workplace financial wellness programs. She’s also a volunteer and media ambassador for Feed the Pig and 360 Degrees of Financial Literacy. In Kelley’s perfect world, everyone would feel great talking about their money concerns, fears, questions and problems, because then everyone would see that we ALL have those concerns, fears, questions and problems. Kelley lives in Chicago with her husband and their Himalayan cat Miles, where she also teaches BODYPUMP group fitness classes at the Chicago Athletic Clubs.