Kiplinger's Financial Tips for Teaching Kids About Money

After yesterday's post about shopping with my daughter, this financial lesson plan for kids tagged me at the home plate. It's from the folks at Kiplinger’s Personal Finance and it's an age-by-age guide.

The tip about declining prepaid debit cards for kids is wonderful!

Here is the article with a link to the full article in the magazine:

"The new school year is a time of fresh beginnings—a great opportunity for parents to establish some financial lessons. How much allowance should your kids receive? At what age? In the September issue of Kiplinger’s Personal Finance, deputy editor and “Kids and Money” columnist Janet Bodnar explains what your children need to know about money—and how and when to teach them:

Ages 3-5: Big-Picture Years. Keep things simple and don't expect too much. Encourage kids to put coins in a vending machine or pay the ice-cream man. They can play with fun savings banks, learn the difference between pennies, nickels and dimes, or collect state quarters. The more hands-on the activity, the better.

Ages 6-7: Time to Start an Allowance. How much to give? Start with a basic weekly allowance equal to half the child's age. Tie the allowance to "financial chores"—spending responsibilities that the kids take over from you. To make the connection between work and pay, give your children the opportunity to earn money by doing extra jobs such as vacuuming or raking leaves.

Ages 8-10: Bank on It. Help your kids open their own savings account. Should you require your kids to save? Not necessarily—but you can have them divvy up their allowance into pots of money for spending, saving, charitable giving, even investing. Have your children save toward a goal, whether it's a toy or a new baseball glove. And you can always encourage kids to save by matching what they put aside for your very own family 401(k).

Ages 11-13: Parent Power. As you head into the difficult 'tween years, remember that parents have power. Kids will listen to you if you have a clear message and deliver it consistently. Expand their allowance money to include more discretionary purchases such as video games and movie tickets. Kids shouldn't hit you up for 20 bucks every time they head to the mall. Having to chip in their own money puts a natural brake on spending. If you're an investor, introduce them to the stock market with small purchases of stock through sites such as www.ShareBuilder.com and www.MyStockDirect.com.

Ages 14-15: Stick With Cash. Parents should decline prepaid debit cards which banks aim squarely at this age group. Stick with cash. Even at this age, plastic of any kind isn't as real to kids as money they can see and feel. Expand their allowance to include clothing, concerts and other high-school entertainment. Encourage them to get a job—at least over the summer.

Ages 16-18 and Into College: Hold the Plastic. Teens don't realize that a credit card is not free money. They need to know that when you use a card, you're borrowing from the card issuer, which will charge you a high rate of interest. Cash is still king. Help your kids open a checking account (and get a debit card) so they can learn how to balance a checkbook—either by using a check register or online entry—before they head off to college."

Source: Kiplinger’s Personal Finance

Here the link to the full article about financial lessons for kids.

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