Part 3 — Family Meetings: Money Lessons - Teaching Financial Literacy With Age-Appropriate Practices
Teaching children to be good stewards of wealth takes education, engagement, and experience. Communicating and developing a sense of the true meaning of wealth and teaching money lessons that develop financial literacy is a must, and it’s never too early for the lessons to begin.
Below are some helpful habits to think about in developing your own plans for your kids.
AGE 3 TO 5 YEARS OLD
You may have to wait to buy something you want.
Saving. Spending. Sharing. — Save a little, spend a little, give a little away.
This age is a great time to begin setting children up for success and discussing basic money ideas with them. Simple lessons like teaching children that they may have to wait to buy something they want and the ideas of saving, spending, and sharing their money are great ways to begin their financial literacy journey.
AGE 6 TO 10 YEARS OLD
You need to make choices about how to spend money.
Money is finite.
The shopping experience.
At this age the shopping experience can be key. This is a time to teach young children that money, in fact, can run out. With this in mind, they may not be able to buy everything they want, and will need to pick and choose which item(s) they will purchase — with their own money.
AGE 11 TO 13 YEARS OLD
The sooner (and more diligently) you save, the faster your money can grow.
Basic Financial Concepts and the Power of Compounding.
This age is great to talk about savings. Discussing why they should save and how their savings can grow in time. This is also a great age to start discussing basic financial concepts and to help them develop a sense of financial literacy. How much will you have when you are 40 if you add $10 to an account every month at 2% for 30 years? The answer: $4,945.47.
AGE 14 TO 18 YEARS OLD
When comparing colleges, consider how much each school will cost and the likely benefit of a college degree.
More shopping experience.
Beginning discussions of more sophisticated charitable giving.
At this age, including children in discussions that concern larger and more sophisticated financial decisions can be beneficial. Create an environment for financial information to be shared openly, and discuss pros and cons of decisions and investments that may be made.
Preparing a budget and adhering to it.
First 401K, IRA.
Failure is a part of the experience.
This age is when children, now young adults, begin practicing the lessons that they’ve been learning through the years. They are now beginning their own financial journey, perhaps having a job of their own, creating a budget and sticking to it, and creating their first 401K and/or IRA. This is also a great time to foster an environment of open sharing regarding financial literacy so they understand that failure will be a part of the learning experience.
Financial literacy and understanding the meaning of wealth is not learned overnight. It is something that is taught through education, engagement, experience, and time. These simple money lessons at various ages can help to develop understanding and confidence. Successful families focus on creating an environment for safe and open information sharing to teach the next generation to be real stewards of wealth, not just inheritors.
If you and your family have questions or would like to further discuss how to best prepare your family for the transition of wealth, give us a call.
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