Money doesn’t grow on trees, and other lessons for kids

I am a financial planner with 4 kids, ages 9 and under. I have become fascinated with teaching them about money and teaching others how to help their kids grow into financially responsible adults.

One of the best resources I have found on this topic is the website www.MoneyAsYouGrow.Org. It provides wonderful guidelines on financial concepts that kids can grasp at every age.

Here is a summary of the highlights:

Ages 3-5

▪ You need money to buy things.

▪ Money is earned by working.

▪ Sometimes you have to wait before you can buy something.

▪ There is a difference between what you want and what you need.

I know this seems a little young, but kids are very interested in money at this age. They’ll glaze over if you start talking about the time value of money, but you can start by talking about how your family makes money. You can add short and simple paid chores to their routine so they start learning the basics.

Ages 6-10

▪ You must make choices when it comes to how you spend your money.

▪ You should compare prices before you buy.

▪ Sharing information online can be dangerous.

▪ You can earn interest on your savings.

Things get a lot more interesting in this age range as they tend to want more “stuff” and to be involved in more activities. They see what other kids have and may be influenced by whatever the “cool kids” are doing.

Take them shopping so they learn what all this “cool” stuff costs. When you are at the store you can talk about why you choose to purchase one item over another or give them some money with the task of choosing which snacks to buy for the week.

Ages 11-13

▪ Save at least a dime for every dollar you earn.

▪ The sooner you save, the faster your money will grow.

▪ Using a credit card is not free money: It is like taking out a loan.

▪ Money is finite: When it’s gone, it’s gone.

Show some examples of compound interest and what they might gain if they forego a purchase today and save the money instead.

For older kids, you can talk about credit cards. Most likely, they watch you use cards all the time and have questions about it. They need to understand that this is a financial transaction and money is going out the door.

If you don’t pay the bill in full every month, interest can work against you and you’ll end up paying more for the item than it actually cost. Once you’ve decided to purchase something, that money is gone.

Ages 14-18:

▪ Compare colleges and what they cost.

▪ Don’t use a credit card to buy things that you can’t afford.

▪ Money is taken out of your earnings for taxes.

▪ Basic investment concepts

In this age range, they need to understand how expensive college is and how much you are able and willing to pay. Set expectations for the portion they will be responsible for and how they can do it through loans, savings or working.

They may start working a part-time job and need to understand that their paycheck will be less than they think due to taxes. If they have earned income, consider opening a Roth IRA. Talk about basic investment concepts so they can get some hands-on experience in watching their money grow.

At this age, they are a lot closer to having their own credit card. They need to be reminded that if they use a card, they need to pay it off each month.

Ages 18 plus

▪ You should only use a credit card if you can pay it off in full each month.

▪ You need insurance.

▪ It is important to have an emergency fund.

▪ Investing comes with risks and expenses.

Hopefully at this stage, they are ready for more autonomy and can navigate the “real world” without a ton of help from their parents. The credit card discussions are super important now because they may have one and can get one without you knowing about it.

Insurance is a concept they should understand: why they need it, what it does and the cost.

They should have 3-6 months’ worth of expenses in an emergency fund. You can site examples of emergencies that you’ve experienced during your lifetime, from car accidents to refrigerators going out to losing a job.

In previous generations, the topic of money was somewhat taboo. It wasn’t that long ago that husbands didn’t even tell their wives how much they made, much less discuss it with their children.

We want money to be a normal topic of conversation. We want to raise money smart kids who become financially responsible adults.

The earlier we start having these conversations, the better.

Jamie Bosse is a CERTIFIED FINANCIAL PLANNER professional and a member of Financial Planning Association of Greater Kansas City. She is a Financial Planner at Aspyre Wealth Partners in Overland Park. She is the author of the “Milton the Money Savvy Pup” series and “Money Boss Mom, Helping Young Parents Be The “Boss” of Their Financial Future.”

This story was originally published March 22, 2022 at 5:00 AM.