When Carly Gelsinger was planning a trip to Disneyland for her three children, she thought about surprising them with a magical vacation.
“Then we thought that would be a wasted opportunity to teach them about saving and anticipation,” she said. Instead of a big reveal, Gelsinger tasked her two older daughters, ages 3 and 6, with decorating a Disney-themed coffee can to use as a savings account for their trip.
“They did some lemonade stands and chores,” she said, adding that she tried to model impulse control when they were out shopping, telling her kids. “I’m craving a Starbucks, but if I don’t get one today, that’s $5 for the Disneyland can!”
Teaching children the basics about money can seem like an uphill battle, whether they are 4, or 24. But experts say it’s necessary to start the conversation early and keep it going to make sure they are financially literate adults.
We asked parents across the country to weigh in on how they talk to their children about money, and checked in with family money expert, Janet Bodnar, to get her tips on smart money management lessons for kids of all ages.
“You can start teaching your kids about money as soon as they are old enough not to eat it,” said Bodnar, editor-at-large of Kiplinger’s Personal Finance, and the author of “Raising Money Smart Kids.” Bodnar said she believes very strongly in giving children an allowance, calling it “the greatest teaching tool there is.”
Nearly 70% of parents with children ages 4 to 14 give their kids an allowance, on average about $9 per week, according to a survey the kids’ digital money tracker app, RoosterMoney. Handing your child a few bucks each week is a great way to budget and plan. A small discussion about saving can lead to a larger discussion down the road about savings accounts, interest rates and even investing.
While Google Wallet, PayPal, and “non-money” payments are helpful and convenient for adults, kids—even teens—need to see the money, where it comes from and where it goes. Bodnar recommends kids get a certain amount of money each week that isn’t tied to household chores, but that comes with a set of “financial chores” to teach fiscal responsibilities.
That could mean the children are responsible for budgeting for their own purchases, whether it’s the latest video game, a trip to the bookstore, Legos, candy, even snacks at the movie theater. The second part, she said, is giving them the option to earn extra money around the house for chores that are above and beyond daily activities, just like an adult would get paid overtime for working extra hours or taking on a side hustle.
“It could be yard work, it could be taking the trash cans and recycling cans down to the curb every week and bringing them back. It could be vacuuming the family room, washing the car,” Bodnar said. “Then they learn, okay if I do this job, and I do it well, I will earn money.”
So how much to give as an allowance? The going rate for an allowance, Bodnar said, ranges from $.50 to $1 per year of a child’s age, so between $4 and $8 per week for an 8-year-old.
Suzanne Brown gives her two boys, ages 5 and 8, a weekly allowance of $5 and $8, respectively. The Austin, Texas family worked out their own system for how the kids earn that money. “Chores are part of what you do as a member of our family. No one gets paid for that,” she said. “Our boys are paid for doing their “job” — learning. They have to share with me what they’re learning in school and show how they’re developing skills.”
Middle School and High School
While younger kids may be blowing their cash on candy or dollar store trinkets, kids this age can start using their allowance or birthday money for bigger ticket items, such as clothes, music, movie tickets. Once they are driving, they can pay for their own gas.
“You shouldn’t be handing them a $20 bill every weekend when they go out with the kids to the mall,” Bodnar said. “You need to expand their financial responsibilities as they get to be teenagers.”
Debt.org goes a step farther and recommends parents start teaching their children about loans and debt payment around this age. They use an example of loaning your middle-schooler $15 and then requiring a debt repayment of at least $1 per week, with a 50 cent penalty for each missed payment. It’s a concrete way, the site says, to show “why going into debt is sometimes a preferable course of action, but that it is based upon a promise to repay according to a specific timetable, with built-in consequences for default.”
Nicole Slaughter Graham’s has been working on budgeting basics with her now 12-year-old son since he was much younger. “When we go on vacation, he always wants to do a million things,” said Florida mom. “He’d make a list of all the extras he wanted to do, and he’d go down that list and figure out pricing for each thing. Then he’d look at our budget and start figuring out which activities fit into that budget and make some decisions.”
Those lessons have since translated into everyday life. “He does this all the time now,” she said. “He just automatically starts figuring out what things cost and whether or not they’re worth it based on the money he has.”
Bodnar recommends high schoolers get a job when they turn 16 and are legally able to work. “I think that they teach kids very important skills about the responsibility of showing up on time and working with their coworkers and doing a good job,” she said. “And also there’s a real satisfaction associated with having money that you earned yourself and that you can manage yourself.”
Older Teens and College Age
Heidi Kronenberg has been teaching her two kids, ages 18 and 22, how to respect money since they were very young. With two kids in college, loan-free, and living in New York City, all three of them are proving that smart money management pays off.
“When they went to high school, I made them get high school debit cards,” said Kronenberg, who put $50 per month on each child’s debit card. “They learned how to use the card and how to respect it. And it doesn’t let you overdraft.”
Kronenberg’s daughter, now a freshman in college, saved every cent she had for months to buy a $1,400 camera lens. “It took her a long time but she did it,” Kronenberg. “And I could have given it to her for a birthday or whatever, but I wasn’t going to do that because she needs to understand that concept.”
Her son, now in a PhD program at New York University, worked through high school and undergrad and has since saved up enough money for a down payment on an apartment in a tiny Brooklyn neighborhood. Kronenberg is keeping the money lessons going even though both kids are adults.
“When they each turned 18, I set them up with an investment advisor,” she said, adding that they worked with each of her children to determine how to invest based on their financial wishes and what types of investments they valued. “I think it’s invaluable.”
For students that will need loans to get through college, Bodnar said the discussion should start when they are still in high school. She recommends figuring out how much your child could reasonably expect to pay by looking up the average entry-level salary in the field your child is considering, taking that into account.