Kids and Money

The request from money from our kids starts at an early age. The "gimmes" and "I wannas" quickly escalate until the dreaded day comes when the question unexpectedly arises from your young child. "Mom and Dad! Can I have an allowance? ____ (fill in any name here) gets one and I don't! And, from there, it turns into, "_______ (any name will do just fine) gets more than me, and gets to buy stuff" and then to "Can I have a credit and/or debit card? I'll take care of it...P-uh-lease?"

Enough already. So, when should kids start receiving financial incentives to aid in their financial awareness and independence as adults? Janet Bodnar, executive director of Kiplinger's Personal Finance, offers a timeline for your child's financial development.

• Preschool means savings. Kids this age can be taught to "save" their money, but need to literally see it to understand the concept. Adding weekly quarters to a piggy bank, for example, is much more effective than heading to the bank, where kids think it has disappeared. Care providers and parents can work together to teach some basic concepts about money. Examples can include playing "funny money" games or letting kids "make their own purchases" when in line for a snowcone or other purchase-related activity.



• Elementary kids should open a savings account. By this age, kids will understand the benefit of having a savings account. Many schools work in partnership with banks to help teach the concept of saving, using a savings account, and basic premises such as making a deposit. Bankers will even come to the schools on certain "bank days." The benefit of such a partnership is more far-reaching than just about money. It also teaches responsibility, basic math facts, and, depending on the type of account set up, the concept of interest.



• Working teens need a checking account. If your teen is old enough and responsible enough to hold down a regular paying job (more than occasional babysitting or mowing), then it's time to open his/her own checking account. The benefit is that kids will taught about the rewards and consequences that come with a checking account, and learn responsibility for balancing their checkbook and being responsible for their own money. Certain banks may require the checking account to be joint or custodial, but the learning process will remain the same.



• College-bound students need financial independence. If your child didn't get a checking account before now, be sure to open one BEFORE your child heads off to college and then take the time to teach basic financial responsibility concepts. Don't assume your child knows and understands; changes are, he doesn't. The account should feature an ATM/debit card also. Bodnar urges that parents resist the prepaid credit cards or providing kids with a credit card at this stage and instead encourage prudent money management and not "borrowing" or "using credit."



• The final year in college is a good time to get a credit card. Once the notion of job and lifestyle independence is truly on the horizon, then it's time to have a child get a credit card. Otherwise, the lure of easy money could prove to be too much of a temptation...often with disastrous results. You want to teach financial independence and avoid bailing out your kids from money mistakes, and parents should maintain an active role until the kids are truly adults and on their own.