In my day, even if your parents didn’t explicitly teach you about personal finance, money lessons were inherent to life:
Allowance and babysitting jobs were paid in cash.
Savings accounts meant coins and wadded-up singles deposited into piggy banks and the local bank branch.
Charity meant writing a paper check (remember those?!) to an organization, or dropping bills into the collection plate at church.
Paper receipts were collected for future scrutiny. Carelessness meant that you forgot your cash in the back pocket of your summer cutoffs.
Today, money is something else entirely.
Money is digital. Plastic cards are swiped, receipts foregone.
Allowances can and are paid by bank transfer, and savings accounts may or may not net paper statements mailed out monthly.
The fact that so many financial transactions are digital has led to adults’ poor money habits — consumer debt is on the rise, savings and investing rates far below ideal.
If you — like me — are on a mission to teach your children how to be smart earners, savers, and spenders, this is a whole new world, one in which personal finance lessons to kids are being reinvented as we speak.
Here is my guide to teaching your children about money in our digital age, at every stage of life:
Age 4 to 6
When kids are small, only physical manifestations of money resonate with them.
Kids as young as 4 can and should be given an allowance.
In my family, my kids get $1 per year of age (so my 8-year-old gets $8 per week, etc.).
Pay this money weekly, in cash.
Spend, save and give
Buy clear jars (so they can see their stash grow), and label them: Spend. Save. Give.
This sets a clear message from very early on the important parts of money.
In our house, half the money goes in the ‘Spend,’ jar, 25% goes in each the ‘Save’ and ‘Give’ jars.
Gifts for birthdays and holidays can go where the kid chooses.
Open a savings account at your local bank.
Every month, we collect the money in the ‘Give’ jar, and the kids select a charity of their choice.
This is really fun, since you can align your kid’s interest with a charity.
For example, my son is really interested in cheetahs, so he gives to the Cheetah Conservation Fund.
My daughter was upset by the number of homeless people she saw in our city, so we found an organization that supports that population.
Talk about money
Every day you make financial transactions.
Just talk about things as you do them — even if you don’t think your kids understand.
“I’m choosing this milk over this milk because it is on sale, which means it costs less money than normal.”
“I know you want to go to the amusement park, but that costs a lot of money, and I am choosing not to spend that money right now.”
Grade and middle school kids
So much of our shopping is done online, which can be great for finding bargains — as well as stuff we don’t need, or won't use.
Lead by example and curb your online browsing habit.
Try to shop in physical stores with your kids for clothes, household items, as well as browse for books, games and toys for friends’ and siblings’ birthdays.
The selection is smaller, and in-store shopping presents an opportunity to compare two items, side-by-side, including prices.
Teach delayed gratification
When your kid expresses that she wants to buy something, adhere to the 24-hour rule: You have to think about it for a full day before you pull the trigger.
If a day later, the kid does not bring it up, then there is no purchase.
Also, during that day, take the opportunity to discuss the pros and cons of buying the toy — including what else that money could be used for.
Set longer-term goals
Help your child identify larger purchases that require saving for: a bike or expensive toy, for example.
Cut out a picture of the item, and pin it to your kid’s wall or the kitchen bulletin board.
Write down how money from each week’s allowance needs to be saved by a certain deadline in order to have enough for the prize.
High school students
Make giving a function of time and energy
Encourage your student to continue giving a portion of allowance, gifts and job earnings to charity.
But also make a requirement of volunteer time.
Express to your teen:
“Charity is about giving of yourself, which can include money, but is also about your time, energy and talents.”
Teach investment basics
My 10-year-old daughter recently asked the associate at our local branch: “My account is getting less than 1% interest. What can you do for me?”
Compound interest is a concept many adults don’t understand, so spell it out with a simple online calculator.
Encourage your teen to seek out a higher-interest savings account if your local bank falls short.
Also, introduce your kid to stock investing. I am a fan of fractional share investing, like those offered on Stockpile.com.
This site allows you to buy shares of stocks, which means you can invest $20 (or $50 or $200) in Tesla, or Disney, instead of the usual minimum of the price of a single share.
Stockpile has very low fees, and features scores of name-brand companies that your kids will recognize.
Start talking about college costs early and often
The worst message you can give your student is: “Get into the best school you can, and we’ll figure out the money part.”
That is simply unrealistic for all but a very few affluent families.
Instead, start talking about the return on investment for education.
Some degrees and schools may correlate to higher paying jobs, but others will not.
Make it clear how much the adults in your family can contribute financially, and return to that compound interest calculator to help your teen understand the burden that student loans will have on their future.
Teach the drawbacks and power of debt
In addition to education loans, college students are prone to start adulthood burdened with credit card debt.
Pull up your kid’s credit history (children are surprisingly often victims of identity theft!) and discuss different kinds of debt and ways to use credit wisely.
Be vulnerable, and share your own experience with debt — the good, bad and ugly.
Share if you have gotten in over your head, and how that impacted the family’s security, as well as your own feelings about it.
Keep the message simple and positive
So many adults fail to take control of their personal finances because they feel overwhelmed.
Express to your child the fact that: “Money might seem complicated, but with a few simple habits, including regular saving, paying bills on the time, giving to others, and investing for the future, you will be able to set goals and work towards your dreams.”
Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.
Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.