When Should I Teach My Kids About Money?

A lot of folks ask me when is the best time to start teaching their kids about money. And while there is no perfect answer, middle school (6th-8th grade) seems to be the time kids start developing money habits that can benefit them throughout their life. This is because by this time they understand money doesn’t grow on trees, and they are probably asking mom and dad for expensive items such as iPads, smartphones, video gaming systems, etc. So here are some tips for setting your kid up for success when it comes to managing their money.

1. If you give your kid an allowance, be sure to put in writing what they must do to earn their allowance. This is good practice for the real world. Make certain chores a dollar amount and allow them to earn as much (or as little) as they want in a week. For example, making their bed each morning is $2. Unloading the dishes is $2. Mowing the lawn is $5. Cleaning their bathroom is $5. You might give them a cap so they aren’t earning more than you want to spend! At the end of the week have them account for what they did and pay them accordingly. The more work they do, the more they can earn!

2. Open a bank account for your middle schooler and put their allowance in their bank account each week. Explain that with a bank account comes responsibility. As my friend and colleague James Sites at Great Western Bank says, if they follow the “Three James Rules” they should be fine. Here’s what they are 1) Keep $20 in your account at all times. While it may not be your fault, it is your responsibility to make sure your account is never overdrawn. 2) Look at your bank account every day online. Add your bank to your favorite websites and make a habit of logging in daily. 3) Never, ever lend your debit card to anyone. If your friend is going to 7-11 and you want a drink but don’t have cash, you can’t have it. Loaning your debit card can be seen as negligent and you may be responsible for paying for what your friend charged that you didn’t know about until too late.

3. Help your kid figure how long it will take to save enough to purchase that expensive item. If it’s a few months, he will gradually start making daily decisions about what to spend his money on in order to reach his goals. This is great practice for budgeting in the real world.

That’s it! Keep it simple and give them the responsibility. You might find that pretty soon they are finding creative ways to make money so they can get what they want sooner rather than later. They will also learn that if they don’t have money in their account, they can’t buy anything, another great “real world” lesson. I know what you are thinking, what about adding your kid to your credit card as a joint account holder to help them build their credit? That is fine, but do not, I repeat, do not give them a credit card. Teach them how to manage cash first. The credit lesson comes later.