As soon as a child can count and begin to distinguish between coins, they are ready for their first financial strategy: Don't eat the money.
But in all seriousness, here's how to teach about money at each stage.
Toddlers and Preschoolers
At this age children can sort coins, learn their value, and begin to understand how money gets converted into "things” like food and toys.
5- to 7-Year Olds
By the time they start school, many children are ready to receive an allowance. The goal is to give your child the opportunity to budget, spend and save his or her own money. Most experts agree an allowance should not be linked to chores or grades. Extra money for special jobs such as picking weeds in the yard is fine.
The amount of the allowance depends on which expenses the child is expected to pay, so sit down with your child and map out a weekly or monthly budget. One suggestion is to pay 50 cents per week for each year of the child's age.
You can encourage saving by dividing the allowance among three jars. Money in jar 1 can be spent on whatever the child chooses. Jar 2 money is saved for a more expensive item, like a toy or book. Jar 3 is reserved for long-term savings, such as a college fund. Pay interest (even a few pennies at a time) to jar 3 money. Children are fascinated when money makes money.
8- to 10-Year-Olds
Make a trip to the credit union to open a savings account. Let your child fill out the deposit slip, and explain that the credit union will pay interest.
Include your child in family discussions of finances, such as budgeting and planning for family vacations. Explaining how you decided to forgo the fancy sports car in exchange for a sedan and a family trip to the beach can teach about trade-offs and your family's values.
11- to 13-Year Olds
If your child shows interest in the stock market, choose a few stocks, such as McDonald's and Disney, and follow them for a few months. If the child has earned income from a paper route or baby-sitting, for example, he or she can set up a Roth IRA that will accumulate a tax-free retirement nest egg. A $1,000 investment at age 12 can grow to over $150,000 at age 65.
MCCU wants to help your kids become smart savers. We offer two Kids Club accounts – Little Savers for kids up to age 12 and Teen Savers for kids 13-17. They can even begin to earn interest on their account with as little as $5.
If your child or grandchild doesn’t have a savings account yet, giving them the gift of their own account for the holidays is a great idea! Visit us today or call for more information!
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