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Raising Smart Spenders and Savers

| June 22, 2022
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Talking to your children about money can be difficult, especially since if we don’t teach them about it, they cannot fully understand what you mean. A recent T. Rowe Price survey showed that parents consider topics like death and politics easier to discuss with their children than saving for a goal. 85% of parents in that study wanted to avoid the issue by signing their child up for a personal finance course.

While a course might help your children will still take cues from you. Beth Kobliner, the author of “Make Your Kid a Money Genius” told Forbes, “Parents are the number one influence on their children’s financial behaviors” and “It’s up to us to raise a generation of mindful consumers, investors, savers and givers”.

Here are financial lessons you can teach your children throughout various stages of their lives to help them understand the value of money and the importance of proper money management.

Ages 3-6

Do not underestimate them – According to a Cambridge University study, at age 3 your kids can grasp basic financial concepts, and by age 7, they have already formed money habits. Start with simple concepts, such as the idea that you work to earn money to pay for your wants and needs. Then help your children understand the difference between wants and needs.

You could have your child create a wants vs needs collage by dividing a sheet of paper in half and cutting and pasting photos that they want and helping them properly categorize the items.

Another early milestone is recognizing tradeoffs. Doing things like thinking aloud when grocery shopping about the amount of money you’re exchanging for a product or asking them to help you compare prices will help you demonstrate good money habits and how all decisions have a consequence.

Around age 5 is a good time to consider giving kids an allowance to manage. This allows them to start experiencing their own financial tradeoffs. You could offer them a three-part piggy bank – save, spend and share – so that they begin to understand the functions of money.

By age 6, your child should be able to focus on small chores to earn money and understand the value of different coins and bills well enough to sort and count them.

Ages 7-12

As your child grows, help them develop values like empathy and gratitude. Understanding that some people live in poverty and require assistance is a part of financial literacy.

This is also a good age to pass down family stories – how your family pitched in to help you build your business, your first big purchase, or how spending habits have affected your life. These stories can help kids understand their place in the world and develop perspective on what has value in life.

These years may also be a good time to have your child open a bank account, which can help them claim the identity of a “saver” and associate positive emotions with it. You should also help them track what they are earning in interest.

 Ages 13-18+

Credit cards, investing, taxes: as your child becomes a young adult, it’s time to step up your game to help them with these complex topics. You can start by doing things like letting them take control of buying school supplies on a budget or help them calculate credit card interest.

Talk about which data sources can be trusted. Share how you vet financial decisions and teach your teen to keep digging if what they’re being told isn’t adding up.

Many successful people trace their money skills back to getting a job as a teen. There’s no better way to experience firsthand the effect of taxes, having a boss, being part of a team, and managing your time. A seasonal job during school holidays or part-time work could help your teen better grasp the working world.

Finally, come up with a savings plan for long-term goals, like a car or college tuition. Create a budget that helps them visualize their progress, keeps spending in check, and gives them a sense of ownership and confidence in their future.

Starting the conversation is the most important step. No matter what age your kid is currently, they are ready to hear money talk from their parents and grandparents. After all, financial literacy is not solely about dollars and cents. You are showing them how to think for themselves, develop values, and make sound decisions. In the space of a few teachable moments, you can empower them to take control of their future – a worthy investment.

Sources: T. Rowe Price 2019 Parents, Kids & Money Survey; Forbes; Inc. magazine; CNBC Millionaire Survey; U.S. Consumer Financial Protection Bureau; Sallie Mae’s 2019 Majoring in Money report;

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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