After a recent study from the University of Cambridge, The Money Advice Service located in the United Kingdom says that kids’ money habits are formed by age seven.
Parents are in a great position to teach their kids good money management habits, and kids are willing learners.
Age-appropriate ideas you can share with your kids:
Up to age five:
Sometimes you must wait until you have the money to buy something you really want.
- Talk about waiting in line to take your turns and how it’s important to be able to wait for things you want
- If there’s something your child wants to buy, help them save for it and talk about their progress
Up to age ten:
It’s good to be able to make choices about how to spend the money you have.
- Talk about how you choose to spend money as a family, such as which stores you shop at and what you choose to buy at the supermarket
- When you buy something, talk about whether it’s a needed item or a wanted item
Up to age 13:
Discuss saving for longer-term goals and talk about how interest can help savings grow over time.
- Encourage your child to save a portion of allowance and gifted money in a savings account or money market account so they can earn interest
- Talk about how you save for long-term goals that allow you to make positive life changes, like managing debt or buying a car
Up to age 18:
Credit card use can be tricky, so it’s important to pay your balance each month.
- Managing credit responsibly is a life skill that can help you get access to better interest rates, and potentially save your child tens of thousands of dollars in the future, so talk about using credit in a responsible manner early and often
- Discuss debt with your kids and be honest about how difficult it can be to pay down debt if you’re maxing out limits and only making minimum payments over time
Older kids can handle conversations about the responsible use of credit and how taking care of their credit scores can help them reach financial goals later in life. Discuss how having an emergency fund, even if it’s small, can help them avoid paying interest on unexpected expenses like car repairs and medical care.
Personal installment loans can offer an alternative to using credit cards. As opposed to credit cards where your payment amount can vary based on your overall balance, these personal loans offer set payments for a specified term, and the payments are designed to fit within your available budget. Because of this, a significant portion of the principal balance is paid with every payment, whereas only making minimum payments on a credit card usually only covers interest and decreases the principal very little.