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How to Raise Money-Smart Kids

Forming their money habits young is crucial to their future habits.


Photo courtesy of New Jersey Family

One of the most important things we can teach our kids is a basic understanding of spending and saving. Yet so many of us don’t, despite the fact that kids’ money habits are formed by age seven, according to a Cambridge University study. So it’s never too early to start teaching the value of a dollar.

Where to begin? We asked financial expert and best-selling author Beth Kobliner to share her best tips to raise financially-savvy kiddos. Read on to help your kid become money-smart (even if you’re not).


This is especially true for kids in the 3-5 age range, when it’s all about teaching delayed gratification. Remember the classic marshmallow test? This famous study showed that the kids who were given a marshmallow and waited to receive a second one after holding off from eating the first were more successful adults (with higher SAT scores and lower body mass indexes) than the kids who gobbled the first marshmallow right away. So don’t give in to a toddler begging for Shopkins in the checkout line. It’s an opportunity to teach your kid that needs are different from wants.


Studies show that parents are more likely to talk about financial issues with their sons than their daughters. This needs to stop, especially given the uphill climb our girls will face trying to earn salaries on par with their male peers. Make sure your kids are equally prepared for a smart financial life.


It’s important for kids to know that money goes in a safe place—and that we save it for different goals. One great technique is labeling three money jars for spending, saving and sharing. Talk about the importance of putting away some money for things we need now, some for things we’ll need later and some to give away as donations or gifts.


It might seem crazy, but giving your kid a wad of cash is actually a better parenting move than handing over a credit card. According to a famous Massachusetts Institute of Technology (MIT) study, people spend less when they’re using cash. This has to do with a mental impact known as the “pain of paying.” Using cash helps kids see and feel the transaction that happens when making a purchase: We have to give something up to get something we want.


Middle school is a good time to introduce a key financial concept that’ll wow your kids. Tell them compound interest is a way to supercharge savings and explain how it works. For example, if you set aside $7.50 a month— essentially a quarter a day—starting at age 10 and earned an average of 7 percent a year, you’d have $51,800 in the bank by the time you hit 65.

Beth Kobliner is the author of the New York Times best-sellers Get a Financial Life and Make Your Kid a Money Genius (Even If You’re Not).


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