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Indiana Securities Division

Securities Division > Indiana MoneyWise > News You Can Use > Money Clip Tips - Money Tips for Financially Responsible Kids Money Clip Tips - Money Tips for Financially Responsible Kids

Originally Published August 2012

                According to a study conducted by the National Jump$tart Coalition for Personal Financial Literacy, 58.3 percent of money management skills are learned at home, verses 19.5 percent who said they learned such skills at school, and 17.6 percent from experience.  However, according to a survey from Northwestern Mutual, less than 40 percent of parents talk about credit cards, loans and debt and other basic money management skills with their kids and even fewer, less than 23 percent, talk to their kids about how to invest.  With statistics like these, there is no wonder financial literacy in children is on the decline.  Parents need to teach their children the ins and outs of finances and budgeting.  Below are goals for each age group that will ensure strong money management skills and in turn greater financial success later on in life.   

It is never too early to begin teaching kids about money management.  The goal for ages 3-6 is money recognition.  At this age, teach the value of different coins and paper bills.  If possible help them understand simple addition (e.g. four quarters equals one dollar bill or two dimes plus a nickel equals a quarter).  They will be off to a good start, with a solid understanding and appreciation of even the smallest denominations of money. 

Around elementary age, start teaching the concepts of spending, saving, charity and investing. 

A good way to do so is by giving children an allowance.  For some families allowance is tied to daily chores but this is not a necessity.  Use allowance to teach the basics of money management, especially the basics of saving versus spending.  At the very least have kids save 10 percent of their allowance.  If possible, put another 10 percent to charity and another 10 percent towards investing so that these healthy financial habits are learned at an early age.

Junior high kids should start to get real life money management skills in banking, investing and working for money.  Start letting kids have more freedom with their allowance.  Let them decide how much they want to spend, save, donate and invest.  Set up a savings account for them and/or let them choose a company to use the money they have set aside to invest.  Odd jobs, such as babysitting or mowing the neighbors lawn, are a perfect chance for kids to learn how much work it takes to maintain a certain way of life.  Make sure they budget money from odd jobs the same way they have been budgeting their allowance.   

By high school, kids should start gaining confidence with advanced money management skills including writing checks and using ATM and credit cards responsibly.  Go over the correct way to write a check, make sure they know how to balance their registry, and help them use their ATM or credit card responsibly.  Kids that do end up with their own credit card (or their parents’ card) should be encouraged to pay their own bills each month.  It is important that they see how credit card payments go up and down with the balance and make sure they know the consequences of not paying on time.  Try not to bail them out; make sure their needs are covered, but if they spend all their extra money on a pair of designer jeans, don’t pay for them to go to the movies with their friends.  They made their choice and need to live with it! 

Allowances should be raised as kids get older and take on more responsibility.  Talk with other parents to get an idea of what a ‘good’ allowance is at any given age.  Teaching children about money management now will help to ensure their financial future by giving them the skills they will need to succeed. 

For real life ideas to ensure your kids are financially capable, check out MoneyAsYouGrow.org