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Investing the time and effort to teach young people about money can pay big dividends in more ways than one.
Teaching young people how money works can also present an opportunity to teach young people lessons about responsibility, planning for the future and other life lessons.
One thing to consider is that different topics are best addressed at different ages. Here are some tips:
Age 3-5: Keep It Concrete. Use cash around preschoolers-credit cards are too abstract. Let them collect coins in a clear container so they see the money. For starters, try showing a child that five pennies equal a nickel.
Age 6: Make Allowances. Now is the perfect time to start a weekly allowance. Many kids begin with an allowance of about $5 a week until age 8. Some parents use a formula based on age. For example, an allowance of $6-a -week at age 6.
Age 9-10: Budget Time. Introduce them to a basic household expense budget. Open a savings account for them if you haven't already.
Age 11: Take Stock. Help them understand stock market basics-such as why prices go up or down. Teach them about compound interest.
Age 12: Responsibility Rules. Extend their weekly allowance to twice a month. Have them begin earning money outside the home (babysitting, mowing lawns, etc.) Open a checking account for them.
Age 13-15: Take the Plunge. Compile a list with your child of what you expect his or her allowance to cover (friends' birthday gifts, entertainment, etc.) and use that total when determining allowance. Introduce them to credit with a debit or prepaid card.
Age 16-18: Future Focused. If your child has a part-time job, discuss tax-related issues. Consider opening a Roth IRA for him or her.
Age 18+: Damage Control. College freshmen are deluged with credit card offers. Even if you've introduced them to responsible use of credit, they may still come home maxed out. Emphasize the importance of a budget-and learning from your mistakes.
The financial professionals at Primerica have created a guide that shows you how to take control of your financial life. To get a copy of How Money Works, write to Primerica, 3120 Breckenridge Blvd., Duluth, GA 30099, ATTN: Corporate Relations, call 770-564-6329 or visit www.primerica.com.
John Addison is Co-CEO and president of Primerica, a subsidiary of Citigroup, Inc.
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