Let’s break this into three categories–Children (up to 8), Tweens (9 to 12), Teenagers (13+). At all stages of your child’s life there are simple and valuable lessons to be learned about money and investing.
Children – This is the fun age that you teach your children the difference between a dime and quarter. Let them play with your change and add it up. Start a piggy bank for them and talk them through what that money can buy. Allow your children to take a little wallet to the store and buy themselves a treat. Have them count out the needed change at the register. Children will learn pennies, dimes, nickels and quarters really fast when they want to buy a candy.
Tweens – This is a very good stage at which to educate your tween about checking and savings accounts. I have a tween girl right now and have given her a pretend check register (excel spreadsheet) so she can budget her weekly allowance and any gift money she receives. We talk about her inflow and outflow of funds and how she budgets her money each week. Part of that budgeting process is allocating some funds to savings and charity. I check her register often to make sure the columns are all adding up and she understands the process. I advise a simple division of funds, for example:
- 1/3 Savings
- 1/3 Charity or Community needs
- 1/3 Fun spending
Teenagers – By the time your tween has become a teenager, she should have a good handle on what it means to save, give back and spend. At this point I would recommend opening a custodial investment account for your teenager with a portion of the funds he has been saving in their tween years. This does not have to be a large amount because it is for educational purposes, first and foremost. This process shows your teenager the importance and value of savings and investments. Take 30 minutes each week to discuss the basics of the stock market either through books or online. Keep it simple to encourage her interest (I would not recommend throwing out beta at your first discussion.) Together, choose his or her first investment and then track the performance as a team.
Have fun with these different stages of your child’s life.