Your children learn important money lessons from watching you earn, spend, save and borrow. They understand more than you think and are more open to your ideas the younger they are.
Lay a firm foundation
If used as a teaching tool and not a giveaway, an allowance is a good way to teach children about managing money. (To find what allowance is age appropriate, visit http://money.cnn.com/magazines/moneymag/money101/lesson12/index2.htm.)
Teach your three-year-old child that you need money to buy things. Help him or her identify coins and their value, discuss how he or she may value something that is free (such as playing with a friend) and identify items that cost money, such as ice cream, petrol or clothes.
Explain that you earn money by working and describe your job to your child. Point out people who are working, such as the shop assistant. While your child waits for a turn on the swings, for example, explain that sometimes we have to wait for things we want. Encourage your child to put some money into a piggy bank to buy a toy or treat when enough is saved.
Older children
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- Take your child shopping with you and discuss what makes some items “too expensive” and others “good buys”.
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- At around age eight, help your child to open a small savings account to begin learning what banking is all about. Encourage your child to decide how much should go into savings (which reinforces the concept of “pay yourself first”), how much should go into a bottle marked “spending” (for pocket money) and how much should go in a bottle marked “sharing” for charity or gifts.
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- Teach your children that it can be costly and dangerous to share personal information online. Explain that “free” offers (cell phone ringtones or games) are scams to get people to spend money without realising it. Make sure your child never answers emails from someone he or she doesn’t know and never clicks on pop-up ads.
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- Encourage your teenager to get a holiday or part-time job to gain work experience and learn responsibility.
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- If you have a financial advisor, take your older teenager with you once a year to listen as you work with your advisor. Your child will learn that investments can produce higher returns than bank deposits over the long term, but that the risks and annual expenses must be considered.
Sources
http://money.cnn.com/magazines/moneymag/money101/lesson12/
http://moneyasyougrow.org/#
www.fdic.gov