By Mitzi Carletti and Julie Parisio Roy

Studies suggest that habits take root in children as young as age nine. Creating positive saving and spending habits in your children will help set them up for better financial fitness over their lifetimes. Here are some ways you can teach your children standards for personal finance, no matter whether they’re just starting school or moving out of the house.

Ages 5 - 8

With younger children, you can begin teaching the fundamentals of personal income and of developing a plan for saving, spending and donating.

Start with a small allowance that is easily divided into thirds to teach children how to allocate responsibly between these three “buckets.” Offer one-off household tasks as additional opportunities for your child to earn money.

Demonstrate spending by allowing your child to trade money for something else he or she wants, like a treat. Talk to your child about times you have opted not to spend money on something, and why. Discuss the difference between borrowing something and buying something – and explain that something borrowed must be returned.

Build a foundation for saving by identifying a savings goal that you can experience together, like a ticket to a movie or the zoo. Add the experience date to the family calendar and track progress weekly. Take a trip to your bank and let your children deposit money into their own savings account, and talk to them about the types of things you’re saving for yourself. Have the bank mail statements to your children. Receiving mail will be exciting and it’s a convenient reminder to take a moment with your children to review their account and the interest they earned.  

Introduce donating by helping your child research different charitable organizations and identify which one(s) appeal to him or her, then following through on the donation.

When there’s a gift-receiving opportunity like a holiday or birthday and kids are asked for gift ideas, discuss appropriate price ranges and why that matters. Discuss how a gift from a grandparent may be a different price range than a gift from a school friend.

Ages 9 - 12

With your older elementary and early middle school aged children, focus on expanding their personal finance vocabulary to the concepts of borrowing and lending, and on building their knowledge of responsibilities associated with financial decisions.

Raise your child’s allowance as he or she gets older and identify jobs kids can do on a regular basis around the house to earn money. Discuss that with more financial reward comes greater responsibility.

Encourage your child to begin to track his or her spending and saving; there are many online resources and apps that can help.

Demonstrate responsibility associated with financial decisions by discussing how saving money can improve financial and personal well-being. Predict the financial and personal outcomes of different spending decisions, such as using all of one’s spending money on candy versus saving up for a month to buy a new video game versus saving for six months to buy a special teacher an end-of-year gift.

Talk about practical money-handling situations like keeping track of cash sent from a relative in a birthday card or discussing how to best keep track of lunch money after the school bell rings.

Make real the concept of borrowing and lending by allowing your child to have money for something he or she wants, with the understanding that he/she will pay you back over time. Mark the dates payments are required on the family calendar. Discuss how financial institutions lend money in this manner to borrowers who must pay it back.

Ages 13 - 17

Older kids are ready to learn about expanded financial concepts like alternate sources of income, creating a financial plan, credit, philanthropy and evolving financial responsibilities. Soon, they will leave home and be expected to manage their finances independently, so now it is crucial to make sure they’re armed with the knowledge they’ll need.

Beginning in late middle school, introduce the concept of the different types of income. Talk about how unearned income, like interest, investment income and dividends, is different from earned income such as compensation, tips or self-employment income.

Explain employee benefits – even sharing your company’s employee handbook with your child – and talk about the tangible and intangible value of these benefits.

Create a detailed plan with your child to manage his or her saving, donating and spending goals. Talk about ensuring that his/her goals are in line with his/her values. Discuss how changes in spending habits can contribute to financial stability over the long haul, illustrating how both monetary assets, like cash, and nonmonetary assets, like property, contribute to net worth. Explain the concept of inflation and how it can impact spending power over time.

Talk about how the government helps low-income, disabled or elderly people who have financial need. Show how financial contributions to nonprofits help the contributor as well as the recipient. Spend some time with your child discussing how his/her financial decisions can help others.

Teach your child about credit, explaining how credit cards are different from debit cards – and how interest rates, borrower grace periods and fees can affect credit card debt. Talk about different situations in which one might evaluate whether or not to use credit and compare the costs of borrowing different sums ($500 vs. $1,000 vs. $5,000) from different consumer credit sources.

Research together the different types of college costs and how taking out student loans can impact family financials. Help your child build a realistic budget for his/her freshman year in college.

Also, discuss age-appropriate money handling and spending topics, like combatting peer pressure, keeping track of cash and spending, and how financial responsibility changes with age, starting a family and other life changing circumstances. 

No matter the age of your child, don’t create money anxiety by saying, “We can’t afford that.” Instead, tell your child, “That’s not how our family chooses to spend money,” or “That’s not a priority for our family right now.”

Perhaps the single most important takeaway on the path to arming your child with personal finance standards is to maintain open communication. Share your own experiences – both the sound decisions and the mistakes – so that your child feels confident about asking questions or sharing concerns now and in the longer term. Modeling sound financial fitness for your children will help ensure that your family’s values will survive generations and be woven into your family’s legacy.