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A year-by-year guide to teaching kids about money

Money is everywhere. On a daily basis, we earn it, borrow it, read about it and watch it on TV — and until recently, most people thought only adults spent it. According to CBS News, in 1983 companies spent 100 million dollars marketing to kids; today, that figure is closer to 17 billion, and with good reason. PBS estimates that teens will spend about $155 billion this year — and that doesn’t include kids who strongly influence their parents spending habits.

So how do parents make sure their children are making the right financial decisions? As with every other parenting quandary, the answer is to keep your child’s age in mind and do what works best for you and your family. Here’s a list of age-appropriate money lessons for kids as they grow.

Ages 3-5

This is a great time to start teaching your kids about money and to introduce your children to coins. Play a game of identifying them and their worth. Most kids at this age will pick a nickel over a dime because it’s bigger. Don’t sweat it — as they get older, kids will figure out the dime is worth more. Introduce your child to the concept of waiting. Talk about taking turns waiting for the slide or the swing and then talk about waiting to spend money. At this point, it’s about engaging your child in your daily life. When you go to the ATM, tell your toddler that mommy or daddy had to work to put money in the bank so they can take it out.

Ages 6-10

Most families introduce the concept of an allowance at this point. No matter how you set up this financial part of your life, teaching kids the concept of saving for a long-term goal is critical. Talk to your child about a small toy or game he wants, then help him set up a jar or envelope to save for it. Continue engaging your child in your daily financial life by discussing how you set aside part of your paycheck for emergencies.

Encourage your kids to save some of their money, but don’t be discouraged if they don’t. The rainy day fund is not an easy concept — there are a lot of adults who still don’t get it. This is also a great age to bring up the concept of “needs” versus “wants.” When you’re at the grocery store, talk to your kids about what is a necessity (milk) versus a treat (cookies).

Ages 11-13

Tweens love to hang around the mall. This is a good time to talk to them about comparison shopping. Discuss the difference between name brands and generics and whether one is really better than the other. This is also a great time to teach your kids about interest rates, and how they can work for or against you. Start to talk about long-term investing and introduce the idea of responsible credit use and living within your means.

Ages 14-18

Teens in this age bracket have a number of responsibilities: getting a driving license, finding a summer job, applying to college, etc. Within a few short years, they’ll be completely out of the nest. If you haven’t had any discussions about money, now is the time. Decide on a monthly budget with your teen and then have him manage his own money. Discuss good money management practices, like always having a cushion and not letting the account balance get too low. Let your teens make the painful mistakes now, when they are small. Better to bounce a check at 17 then have a car repossessed at 25.

If your teen plans to go to college, have a frank discussion about how much college costs and how much you can contribute. There are many great online tools for determining college costs, such as the U.S. Department of Education’s College Scorecard. There are also financial calculators that will help you show your teen how much student loans could cost them if they decide to go that route.

Many parents also provide their teens with a credit card for emergencies at this point. Be specific about which purchases are allowed and define what an emergency is. Their definition (the boots that everyone is wearing) versus yours (running out of gas) could be very different.

A lot of kids get their first job during these years. Your teen’s first paycheck may be smaller than anticipated; take this opportunity to start briefing him on taxes.

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