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If you want to empower your kids to make smart financial decisions throughout their lives, it pays to start teaching them while they’re young. After all, life can be a bit more challenging when you don’t have the basics down—and that goes for financial fundamentals, too.

While you wouldn’t try to explain responsible credit use or how compound interest works to a four-year-old, you can teach even young children about money—a little at a time—in age-appropriate ways. Here are some great ideas to teach your kids how to master money.

Preschool (Ages 3-5)

Learning to wait. One of the first lessons children need to learn is how to wait for something they want. Whether they’re waiting their turn in line to go down a slide or saving up for something special, it’s important for them to learn self-control. And, the best way to master a skill is to practice it.

Put It Into Practice:

Let your kids pick something inexpensive they’d enjoy (like a treat or toy), and tell them they can pay for it themselves. (Stick to low-cost items so that they can save quickly enough that they don’t become frustrated by a long wait.) Encourage them to put a portion of their allowance (if you use one) or birthday gifts in a see-through container. It you don’t use an allowance, you can give them age-appropriate ways to earn money. Consider matching what they contribute. Count the savings together frequently and let them know how close they are to their goal. It’s exciting to watch their money grow. Then, on the big day, celebrate by making the purchase together!

School Age (Ages 6-12)

Making choices. At this stage, kids can understand that resources are finite—including money. That’s why it’s important to reinforce smart spending choices.

One of the best lessons they can learn at this age is evaluating alternatives. Is there a lower-cost or no-cost alternative? When does it make sense to choose a pricier option? It’s all about understanding affordability and how to stretch a dollar.

Put It Into Practice:

On your next shopping trip, involve your child in the decisions. You may want to set a limit on how much you have to spend and use the calculator on your phone to estimate what you’re spending as you go along. Explain the choices. It doesn’t matter whether you choose items that are comparable but cheaper than brand names or decide on higher-quality items that cost a bit more; what’s important is that kids understand the thought process.

After your trip, sit down to review your receipt together. Note how the things you bought added up and focus on any areas where you were able to save money, especially if there was a sale or you used coupons. Were there any places you could have spent less? Remind your kids that every dollar they save can be used for something else or to start a new fund. Encourage them to ask questions and make suggestions for your next trip.

Teenagers (Ages 13-18)

Using credit responsibly. By this age, it won’t be long until your kids are out on their own—which means they may have credit offers pouring in. Many people make mistakes with credit when it first becomes available to them. During the teen years, consider getting your child a prepaid card to encourage responsible spending. Stress that the three most important questions to ask themselves are:

  • “Is this a need or a want?”
  • “If it’s a need, do I really need this?”
  • “If I do need this, do I need this today or could it wait?”

Put It Into Practice:

Load a prepaid card for your child, such as Navy Federal’s Visa® Buxx Card, and explain how much is available, how it can be used and how to track spending. Talk about their choices from time to time. Once the limit is reached, discuss the choices they made. Were they smart? Frivolous? It’s ok to have a little fun, but if your child blew through it in a hurry, set new rules and expectations to encourage smarter use in the future. If the choices were good ones, consider reloading the card for a slightly higher amount.

The next step might be to have your child “pay” for their purchases at the end of a month by using allowance or money they’ve earned to reload the card for the amount they spent. That way, they’ll start to learn about paying back credit. Ultimately, the goal is for them to understand how to prioritize what they do with their money.

Want to teach kids how to save for the future? Navy Federal Credit Union offers a number of options that makes getting them started simple. Visit our Youth Finance page for more information.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.