Tips for teaching kids about money from 7 On Your Side
NEW YORK (WABC) -- April is Financial Literacy Month, a month devoted to getting your finances in order.
What better gift to give your kids than to teach your children the value of a dollar.
How do you avoid being the "Bank of Mom or Dad"? Experts say it's like any other parenting skill, start early. That means you can start teaching kids about money as early as Pre-K or Kindergarten. But they are lessons you keep teaching until high school graduation.
For the younger set, use the three-jar method. Use clear jars so kids can see the money growing. Label one saving, one spending, and the last is sharing or giving. Any money given for birthdays or holidays gets split equally three ways.
The spending jar is for "discretionary" spending. The saving jar teaches delayed gratification to save for something that's a little more expensive. The sharing jar teaches social responsibility to have your son or daughter choose a charity, and after their savings reach a certain level they should donate.
For middle schoolers, experts advise giving commissions, not allowances. Make a list of chores like taking out the garbage, cleaning your room, and doing the dishes. So kids learn hard work has value and that you don't get paid simply for breathing.
When kids reach high school, they may get job and that means saving for college. So check out a 529 Plan, a tax-advantaged college savings account where teens can contribute a portion of earnings.
And encourage entrepreneurship. One teen made $200 in 2 weeks baking and selling delicious scones, and donating a portion to an animal shelter.
Some big takeaways:
- Avoid impulse buys. Instead, teach patience, that kids must earn and save before spending.
- When they're in high school, teach them about the dangers of debt and credit cards.
- Parents need to set a good example. If you're whipping out your credit card and over-spending, you're not practicing what you're preaching.
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