Teaching Your Child Good Money Habits: An Age-by-Age Guide

First Service Credit Union
8/1/2018 12:00:00 AM - 4 min. read

You teach your child good manners, to do their homework, and clean their room. But are you teaching them good money habits? You should. The earlier your child learns money-management skills, the stronger their financial outcomes will be in life.

Prepare your little one for the financial road ahead, with this age-by-age guide.


Birth to Toddler Years

Start a savings account when your child is born. The earlier you start saving for their future expenses, the better, as your interest will compound, increasing their savings. Once they’re older, they will start depositing into this account on their own.

custodial account, also known as a Uniform Transfer to Minors Account (UTMA), is a savings account you can establish at your bank or credit union in your child’s name and retain complete control of until they turn 21. Also, set up a college savings fund with a financial advisor to get a jump start on their college expenses.

You can begin to teach your kid the value of money as early as 3 years old. Give them a few coins or a dollar for putting up their toys; then, take them to the store and allow them to use their money for a small purchase. Also, give them a piggy bank to keep their money in and explain the importance of saving.


Elementary School Years

The primary years are the perfect time to teach your child about money management. Experts say to give your child a weekly allowance of $1 per year of age for completing extra chores or duties. Next, show them how to use it in these four financial categories:

  • Saving: Teach them to save first. Have them deposit a percentage of their allowance into their savings account and name a special item that they’re saving for. This teaches your child delayed gratification and how to save for bigger purchases.

  • Spending: Designate a portion that they can spend on small purchases, such as a special snack or an inexpensive book or toy.

  • Investing: Teach the value of growing their money by investing into a longer-term savings vehicle, such as a custodial account CD. You can help contribute to this area.

  • Giving: Charity is an important principle for your son or daughter to learn early. Have them give 10 percent to a charitable organization.

Don’t forget to make learning about managing money fun. “World of Cents” — an interactive kid-friendly game created by the NCUA — teaches basic financial principles, plus math, as they build their own virtual worlds.


Middle School Years

At this age, your child’s needs and wants are more complex. They’ve moved beyond candy and toys to clothes and pricier electronics. Therefore, it’s time to elevate their financial literacy lessons.

Share your household budget with them for a real-world view of how finances work. And, now that their needs and wants are more expensive, teach them how to spend responsibly by bargain shopping. You can also start teaching them about the power of investing with an investment calculator, which shows how compounding interest really adds up. In addition, they can begin contributing to their college savings fund for a hands-on lesson.


High School Years

As your son or daughter is inching closer to adulthood, it’s time to start transitioning their money habits, accordingly. Begin by giving them their allowance monthly, instead of weekly, to teach them how to budget a larger sum.

Also, by ninth grade, discuss what colleges they want to attend, review the costs of each, and explain which schools you can afford, narrowing down their options. Also stress the importance of getting good grades and applying for scholarships and financial aid.

Once they’re old enough, encourage them to get their first job and open a checking account. Give them a bill to pay, such as their phone bill or car insurance, and have them continue to save and invest. These money management practices will successfully lead them into financial independence.