John Nardini, Personal Finance Author, Advisor, and Publisher, Grand Rapids, Michigan

Summary: What you teach your children about managing money will affect them for the rest of their lives. Follow this developmental plan for what to teach your children during the various stages of childhood.

Never too late—or too early

What you teach your children about managing money will affect their entire lives. Children must handle money often, and from an early age, to become financially responsible adults. It is never too early—or too late—to begin.

Ages and concepts

At ages 3-5, children understand simple concepts, so start on the basics. Teach them to identify coins and their values. Take them banking, and explain that banks keep money safe until you want it. Discuss the grocery items you chose, and allow them to pay the cashier. Keep it simple and fun.

From ages 6-11, an allowance is an excellent way to show how to earn money. Simultaneously, help your child develop a simple budget to manage resources. Decide together what percentage he or she will spend, save, or give, then provide a container for each category.

A few tips

? Allow a child to choose (within reason) how to spend her money. Experience is the greatest teacher, so allow mistakes.

? Encourage giving to foster a spirit of generosity.

? Add a few pennies of ?interest? occasionally to the savings jar, showing that money can earn money.

? Focus on delayed gratification and the benefits of saving.

Early adolescence

During ages 12-15, increase your child’s allowance and responsibilities to prepare for independence. Create a more detailed budget. Add new savings categories for clothing, activities, and entertainment. Allow plenty of freedom, especially in shopping decisions; poor choices reinforce the importance of well-informed shopping. Also review advertisements and discuss what each ad is stating, and why.

Let your child see you paying bills, and show how to make out checks, bank deposits, and withdrawal slips. Explain stocks and bonds, and track a stock together from one of his favorite brands, such as Nike or McDonald’s.

Later teens

By age 16, your child is ready for complete financial training. Open up your budget to show how you plan for and manage saving, spending, and giving. Ask questions about your decisions, and solicit opinion. Use classified ads to discuss salaries, housing costs, and buying a car.

Create scenarios for your teenager regarding possible career choices and the lifestyle each would afford.

If you get your child a credit card to teach responsible use of credit (and many believe this is a bad idea), I recommend that the first time a monthly payment cannot be made, the card should be destroyed.

Ultimately, the best way to teach your children about handling money is by example. As you live out good money practices, they will reproduce themselves in your children.

John Nardini is a Christian financial coach and has published over 130 articles on business and personal finance. He is the author of the popular http://www.FreeMoneyFinance.com blog.

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October–December, 2005

Money