Money Talk With Your Kids


Want to teach your children the value of a dollar and why it is important to save money but you aren’t sure how or when? We asked Tracy Cooper, Certified Financial Planner, Director, and Southeast Division Sales Performance Manager for Merrill Edge for some tips.

  1. When do you think children should learn about saving and spending money?

It’s never too early to teach your children about money. Even when your children are young, you can speak with them about establishing a budget and the importance of saving.

An interesting lesson I’ve heard clients use is to take out one month’s salary in cash, gather the family around the kitchen table and divide it up into piles in accordance with the monthly bills. This way the children can visually see how much money comes in each month, how much goes out and where it goes.

As your children grow older, you can go into further detail on topics like college planning, taxes, and Social Security. Learning about these opportunities as children will help them better manage money as they grow up.

  1. At what age should parents open a savings account for their child?

You can open a savings account at any time to save money for your children, –even before he or she is born. However, when they turn 13 or 14, it may be a good idea to consider opening a joint bank account with your kids so they can begin to visualize their saving and spending. You can also teach them how to save up to purchase things they may be passionate about like a musical instrument or items they’ve had their eye on for a while. As they get older, they might start thinking about buying a car or making another large investment, which requires effort and planning, so show them how to balance a checkbook, create savings goals and keep track of account balances online.

  1. What is the best way to explain earning money to your children?

Even very young children can begin to understand the concept of earning money. Explain to your children that money is earned by working, and that you can only spend what you have.

To help them understand what it’s like to get paid on a schedule, consider paying an allowance. Then, help them set goals for how they spend and save their allowance. It’s important to make sure that you stick to the payment schedule for allowances, otherwise the lesson may be lost.

  1. How do you explain what a budget is and how to budget?

Just as an allowance can help teach your kids about setting goals, it can be a great first step to teach your kids about budgeting and managing money. You might pay an allowance every week for the youngest children, at two-week intervals for preteens, and monthly for teenagers. Gradually spreading out the pay period as children get older will help them understand the need to manage their spending. You can work with your teenager on making a monthly budget for spending their allowance or earnings from a part-time job.

  1. What is the most valuable lesson to teach a child about finances?

As a parent, it’s likely you expect your kids to clean their room, help with the dishes, and do other daily chores. However, consider offering them the chance to make extra money by helping you organize the garage, washing the windows, or taking on another job that goes beyond the routine. Getting paid for extra work may help instill good habits and give your children more control over saving and spending. If your children spend their entire allowance right away, resist giving in to requests for more money before their next allowance is due. Parents should use this as a learning opportunity and talk with their kids about how to make smarter choices and do better the next time. As your children age, you should encourage them to work toward setting aside part of their income to grow their savings account for the future. With careful planning and budgeting, they’ll likely be on track to building a solid financial base and develop good habits for a lifetime.