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Age-by-age guide to teaching kids about money

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If you're a parent who has ever made any questionable financial decisions, like buying a car you really couldn't afford, you've promised yourself - my kids are not going to make the same mistakes.

But your kids probably aren't listening to you now when you tell them to put their dirty clothes in the laundry basket and do their homework. Are your kids really going to heed your advice, years from now, when they're buying a car, house or applying for a credit card?

>> LEARN MORE: How do credit cards work?

Yes, they probably will, say most experts - that is, if you teach your kids about money often and not just spout out a few pearls of financial wisdom occasionally. So if you've been looking for a way to teach your child the value of money, try these strategies. Almost no matter what your child's age, you can be teaching them something. So here we go, from thoughts on when you should start giving your child an allowance to how to help your kid apply for a credit card, financial experts and parents weigh in.

If your kids are 5 years old or younger (or when to begin talking to kids about money)

Teaching your toddlers about moneyAs you might guess, most experts don't suggest spreading out bills in front of a toddler and discussing your money woes with them. So, don't. Let your kid be a kid. But you still can teach a 3-year-old something about finances.

From ages 3 to 5, according to the Consumer Financial Protection Bureau's website, this is a good time to start teaching your child about the various coins that wind up in your pants pocket or change purchase. This is definitely a good age where you can give them pretend money, or a toy cash register (some come with play money and plastic credit cards), in case they'd like to pretend they're going off to the supermarket or a bookstore or wherever.

This is also a good time to discuss your job, and that you get paid for doing your job. In other words, this is the age in which you do what you'd expect: Teach your child the basics of money.

"I would like to see parents teach their children by collecting each day's coins, discussing how many of the smaller coins make up the others and then start a collection for the month," says Stephenie Barker, a real estate agent and author of the new children's book, The Little Copper Penny, published by Brown Books Publishing Group and a book that teaches kids the basics of making change and the monetary value of coins.

And it doesn't take much to impart money lessons to little kids. Barker says that a grandmother recently told her about a game she plays with her grandchildren when they take walks together.

"The game is to see who can find the most pennies. At the end of the walk, the person with the most gets everyone's pennies. What a great game," Barker says.

If your kids are in elementary school (or when to give kids an allowance)

From ages 6 to 12, the CFPB recommends that you start getting a little more technical and explain what's going on when you shop, like talking about why you're making certain purchases and showing them what's on the receipt.

This is also an appropriate time to give your child an allowance and to discuss what they should do with the money, such as saving some of it. The CFPB also points out that this is a time when your kids may start discussing how much money friends or relatives have, or don't have, compared to your household, and you should be prepared to have those discussions.

When to give kids an allowanceParent tip: Allowances are a good teaching tool. Rocky Lalvani, a father of two teenagers and a wealth coach based out of Harrisburg, Pennsylvania, says that he began giving his kids an allowance at age five.

"In order to help kids learn about money, they need to have their own money," Lalvani says. "You can't teach someone to golf without handing them a golf club. Same with money."

He says that he always had his kids give $1 to charity and then split what was left between spending and saving for the future.

"Every year we increase the allowance to be equal to their age," Lalvani says.

Parent tip: A fun way to teach kids about money. Karen Hoxmeier, a Denver-based mom who owns and runs MyBargainBuddy.com, a website that helps people save money, says that when her kids were young - 8, 6 and 4 years old - she instituted "kid chef night."

"One night a week, they would take turns determining what was for dinner, shopping for the ingredients on a budget, and preparing the meal - with supervision, of course," Hoxmeier says.

She says that by creating a budget for the meal, her kids learned to be resourceful and to try to use things that they already had in the house, so they'd have more to spend at the store.

At the store, Hoxmeier taught her kids how to look at the unit pricing in small print on the price tags, so they could get the best possible price. "They also learned how to save money by using fresh produce that was in season. If they needed something that was not in season, we would find a substitution or buy frozen instead," she says.

And as for preparing the meals, well, her kids learned how to cook.

"Today, they are 22, 20 and 18," she says. "They are very responsible with money and some of the most frugal people I know."

If your kids are in middle school and high school (or when to talk to kids about credit cards and loans)

If you haven't started having talks about credit cards, car loans, a mortgage - this is the time, most experts say, that you'll want to start having those conversations about how people buy a house and a car, if you haven't already. In fact, when it comes to money, there's almost nothing you can't talk about at this age, especially as your kids hit high school.

It's certainly time to discuss how to use and not to use credit cards, says Leslie Tayne, a mom of three teenagers, the author of the book Life & Debt and a financial and debt attorney based out of New York City.

"It's important that children are taught the fundamentals of credit cards and that they function similarly to a loan with associated penalties if bills go unpaid. Lessons should be focused on helping them understand that credit cards are not to be regarded as free or infinite money and that every dollar borrowed must be not only repaid, but repaid in a timely manner," Tayne says.

Parent tip: A practical way to teach your kids about money. Airto Zamorano, the managing director at Becker Ear, Nose and Throat Center, in Voorhees, N.J., says that he and his wife created a Google Sheets document for his son to manage his chores.

"On this document, he has a weekly schedule that needs to be checked off by me or my wife," Zamorano says.

Every time a chore is checked off, his teen can see the dollar amount that he gets for it.

"His allowance will reflect the work he completes, and he will only get the full allowance should he finish all of his chores for the week," Zamorano says, adding that the document also has a summary page, "which acts as a ledger for him to show what he has earned, and what he has spent. Believe it or not, he really enjoys using this document. It has taught him to manage his responsibilities and his money."

Parent tip: Teaching your kid how to manage money. Tammy Johnston, a speaker and author in Calgary, Alberta, and author of "The Financial Guides," a series of books that teach money concepts to kids, says that she recommends giving children and teenagers an allowance and having them split up their money into six jars.

One jar is for "financial freedom" (investing). The second jar is for education (college). The third is "long term savings for spending" (maybe your kid wants a computer game, or if you have a high school or college student, a car). The fourth jar is for charity. The fifth is for gifts (you know, birthday and holiday gifts for friends and family). And the sixth is for "play" (candy, comic books, whatever they want as long as it's, you know, something you allow in your household).

"I also tell people to use the same break down for earned money and gifted money. Keeping the rules the same, regardless of the source of the funds, makes it much easier to instill healthy financial habits," Johnston says.

And as Johnston says, "Money is a fact of life, and what kids and teens don't know could seriously hurt them."

When to get your kid a credit card

If your kid is still in high school, even in middle school (even when your child is in diapers, if you want to take this to the extreme), you could make your child an authorized user on your credit card. That means your child can use the credit card when making purchases, and your kid can even start to build a credit history.

But just because you can do something, it doesn't mean that it's a good idea. You really want your middle schooler using your credit card whenever he or she wants? (Your kid may be an authorized user, but you are responsible for making the payments.) And while you may think that you're doing your kid a favor by getting him or her an early start in building a credit history, what if you run into financial problems and end up maxing out your credit cards or paying them late? Your credit history problems become your kid's credit history problems. That's a very good reason not to make a young child an authorized user of a credit card.

>> LEARN MORE: Understanding authorized users

"Instead of a credit card, consider giving your teenager a prepaid debit card or have your teen open a bank account for learning the fundamentals of budgeting money that comes in and out," Tayne says. "This provides teens with a first-hand look and understanding about the concept of saving and what it means to have to pay for purchases made - presenting authentic lessons in accountability and responsible spending without the worry of potential late payments, accrual of interest or damaging credit."

Tayne recommends that your teenager wait to get his or her own credit card until at least age 18, and if you do co-sign (more on that in a moment) for a credit card, your kid should have a job.

"A good rule of thumb to follow for knowing when the time is right for giving children a credit card is: If they can't work, giving them a credit card won't work," Tayne says.

Co-signing for your kid's credit card. You have to be 21 years of age to apply for a credit card on your own, according to the Credit CARD Act of 2009 which raised the minimum age for getting a card, among other things and was passed by Congress and signed into law by then-President Barack Obama. As you are probably aware, one of the lessons of the Great Recession was that college freshman often aren't really thinking things through when they apply for credit cards; it used to be that on campuses across the nation credit card companies would offer, say, a free T-shirt or a water bottle as an enticement to apply for a credit card. Plenty of 18-year-olds did and made purchases without thinking things through. They ended up graduating not just with student loan debt but credit card debt.

So if you want your college student to have their own credit card and not simply be an authorized user, that can happen, but you'll have to co-sign for your kid's card. There are some good student credit cards out there, some that even reward college students for good grades, but you really need to think about things if you're going to be a co-signer. You aren't just vouching for your kid's good character - you're promising that if your student can't make a payment, you will. If your kid maxes the card out, or anything goes wrong, and there's a lot of debt, and somebody needs to step in and pay it off, that somebody will be you. It's a big responsibility and a big financial risk, unless you have a few money trees growing in your back yard.

But, of course, you know your college kid, and maybe he or she is extremely responsible and even has a job. There could be plenty of good reasons to co-sign for a credit card. But, again, give this some thought. If there aren't special circumstances in which your kid truly needs a credit card, it's probably best to let them apply for one when they're 21 or gainfully employed. You know what they say - the road to hell is paved with good intentions.

Another thing to consider if your teenager doesn't have a credit card, and you'd like him or her to have one: Open up a bank account and let him or her have a debit card instead, or give them a prepaid debit card, Tayne suggests.

>>LEARN MORE: Credit cards vs. charge cards, debit cards and prepaid debit cards

"This provides teens with a first-hand look and understanding about the concept of saving and what it means to have to pay for purchases made - presenting authentic lessons in accountability and responsible spending without the worry of potential late payments, accrual of interest or damaging credit," she says.

Helping your college kid choose a credit card. No, your college kid isn't actually a kid, and he or she can make their own decisions. But you'll do your child a favor if you volunteer to help choose a credit card, says Kevin Gallegos, vice president of Phoenix operations with Freedom Financial Network, a national debt solutions company.

"Help them evaluate options," Gallegos says. "Lenders, including banks and credit card companies, are very competitive. They want your business. Don't sign up with a company simply because it sent you an offer in the mail. Help your child compare interest rates, fees and offers."

Teaching your kids about credit cards. You can and should start be talking about credit cards and how they work in high school, of course, but if nothing else, before your college kid or college graduate applies for a credit card, it would be smart to teach them as much as possible about how credit cards work, Gallegos says.

While there is a lot you can tell them, he says, several important points you'll want to make are:

1) "Never carry a balance," Gallegos says. "The key is to never charge more than you pay off at the end of each month."

>>VISUAL AID: How much interest calculator

2) "Live within (or, ideally, below) your means. Easier said than done," Gallegos admits, adding. "Plenty of people who have the latest fashions and tech toys, or drive the newest cars, do so under a tremendous debt burden."

And, sure, you know that, but make sure your kid does.

3) Teach your kid some of the terms associated with credit cards. "Make sure your child understands 'percentage utilization' and 'credit available,'" Gallegos says, offering up an example of what you might tell your son or daughter: "If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that's 35 percent utilization. Anything over 35 percent is considered high and can impact credit scores. Over 50 percent will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score. Best tip: Charge just a couple of small purchases each month, and then pay off in full and on time."

>>LEARN MORE: Credit card terms you need to know

4) "Explain to your child the importance of an emergency fund," Gallegos says. (In other words, your credit card is not the emergency fund.)

"Most people," he continues, "get into serious credit card debt not because they are frivolous, but because of a major personal or traumatic situation. The top three causes of serious debt hardship are unexpected medical expenses, job loss and divorce. To keep from rushing for the credit card in the event of the unexpected - whether a car repair, job loss, illness or other - set up an emergency fund. Conventional wisdom holds that individuals need to save at least six months' worth of living expenses in an emergency fund. It's hard for young adults to understand this, so working with kids can mean a lot here."

Some statistics on college kids and credit cards

  • 23 percent of college students have their own credit card, according to a 2015 study by Student Monitor, a company that researches the college student market. Contrast that to 2005, before the Credit CARD Act of 2009, when 46 percent of college students had their own credit card.
  • 85 percent of college students have a debit card, according to December 2015 research from the student loan company, Sallie Mae.
  • The average college graduate from the class of 2016 left school with $37,172 in student loan debt, up 6 percent from the year before. Depending on your point of view, you could argue that that's a great reason to stay away, at this age, from credit cards, lest your kid get into more debt. Or you could argue that that's precisely why they're needed at this age, as a helpful tool for managing money and building credit.

And we'll let Rocky Lalvani, the aforementioned wealth coach in Harrisburg, Penn., have the last word.

Your kids, Lalvani points out, are modeling their money behavior after you.

So if you're a reckless spender, your kids are going to pick up on those cues. If you tend to be smart about what you spend your money on, and you save money, and you're frequently taking the family on trips with rewards points you collected with your credit card, or your kids see you handing over coupons at the supermarket checkout counter, well, your children will pick up on that, too. So, really, you're teaching your kids about money and credit cards even if you don't actively teach them about money and credit cards. In fact, your own behavior may be more important than what you teach your kids.

"They learn by what you do, not what you say, so you have to be sharp," Lalvani says.

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