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Financial literacy for kids: How to teach kids about money

Whether earning it through an allowance or a job, giving kids hands-on experience can help them learn how to save, spend, and grow their money wisely. 

Here are five money management tips to share with the kids in your life.

1. Consider the benefits of an allowance or a job

Children learn to appreciate the real-world prices of goods quite quickly when the money comes from their own pocket. By allowing your children to take responsibility for their money at young age, they can learn the invaluable lesson of how to budget and spend. 

Once your child reaches age 6 or 7, explore the option of giving them an allowance and consider increasing this sum of money — and financial responsibilities — over time. For example, when children hit the preteen/teen years, it may make sense to give them money to cover their most routine expenses, from school lunches to clothing costs. 

If appropriate for your family, you could also tie the allowance to certain household chores. Or, as they enter their teen years, your child may be interested in a part-time job for extra spending money. 

2. Encourage them give from their hearts

Like adults, children tend to be more generous when they give money to causes that move them. Look together for charities that match your children’s interests. Consider the following sites to research organizations with your child: 

To help prepare children to be good savers and philanthropists later in life, you may want to encourage them to split their allowance or job earnings into three jars or envelopes:  

  1. Spending 
  2. Saving 
  3. Donating

3. Show them the perks of saving

It can be motivating to learn how money grows with the help of compounding interest. Here are three ways you can help your children discover the benefits of saving:  

  • Help them open a savings account and teach them how their bank pays interest. Many banks offer special kids savings accounts. 
  • Provide an additional incentive by offering a match — 50 cents on every dollar or whatever amount you choose — on any money your kids, grandkids or nieces and nephews deposit into their account. 
  • Consider CDs or money market accounts. Depending on how long it will be before the children tap their savings, your financial advisor might suggest looking at certificates of deposit or money-market accounts that offer better interest rates. 

 

4. Help them create good spending habits

As your child enters the teen years, it may be time for them to open a checking account and teach them how to responsibly use a debit card. There are a variety of debit card options for minors – consider researching them with your teen.  

Once you determine the right option for your family, you may want to talk openly about how the card should be used.  

Think of this trial run as your teen’s "debit card with training wheels" period. Like an allowance, a debit card can help teach teens the responsibility of budgeting their expenses. 

5. Interest them in investments

During their teen years, kids may be ready for hands-on experience with stocks, bonds and mutual funds. Talk with your financial advisor about whether it makes sense to open a custodial brokerage account for your kids or grandkids. 

If you decide this is the right choice for your family, consider the benefits: 

  • You can choose investment options together and give your teens a chance to own a few shares of, say, a favorite computer company or clothing retailer. 
  • Tracking their account performance is an excellent way for children to learn about the ups and downs of the stock market. After all, investing involves risk, including loss of principal. 

Talk to your financial advisor

Before you know it, your children, grandchildren or nieces and nephews will be independent adults handling their finances completely on their own. And thanks to your guidance, they’ll be well prepared. 

As you guide your children through life’s money lessons, know that you can always lean on your Ameriprise financial advisor for personalized guidance. 

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned.  The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor.  Please seek the advice of a financial advisor regarding your particular financial situation. 

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Third party companies mentioned are not affiliated with Ameriprise Financial, Inc. 

Investing involves risk including the risk of loss of principal. 

 

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. 

Bank CDs and money market deposit accounts are FDIC insured. 

 

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