Who is responsible for teaching children about money?

Should it be taught in schools, where so much of their day-to-day learning happens? Or should parents (who may be figuring out finances themselves as they go) be the ones who instil the values of personal finance?

Gregg Murset, a certified financial planner, says it certainly should be discussed in school, but home is an ideal ecosystem in which to teach children about money.

Why? Because at home, money theories and lessons can be put into practice. “You have the people that need to learn and the money source living under the same roof,” Murset says. “Your teacher at school is not going to give you money.”

Are you ready to introduce — or build upon — smart money lessons with your kids? The following tips from experts can help you talk to kids about finances at every stage of their growth and share guidance that really, well, hits home.

Ageless advice

One of the most important aspects of teaching children about money is to create age-appropriate lessons by introducing concepts in ways that will both resonate and actually be understood. But, as with most life lessons, some of the strategies are appropriate for all ages.

“One mistake I think a lot of parents make is they just hand their kids money with no strings attached,” says Murset, who feels simply handing over money can confuse a child’s ability to understand how money actually works.

Murset, a father of six himself, suggests that before you simply hand over money to your child, consider what they can do to earn it. AED 50 to go to the movies? Then you ask them to wash the dishes in exchange for the money.

Another consideration for all ages: Determine what motivates your child, advises Melody Bell, Ed.D, CEO and founder of a non-profit that teaches people about financial well-being.

“The important thing to remember is that lessons are most effective when they are relevant to the person learning them,” advises Bell. “Pay attention to what’s going on in your child’s life, what motivates them, and be on the lookout for money lessons that align with life lessons we all experience as we grow up and mature.”

Regardless of what motivates your child, all the experts agree that the earlier you start talking with your kids about the value of money, the better.

4- to 6-year-olds

Lessons: Distinguishing needs and wants; exchanging allowance for action.

Parents may think preschool to kindergarten is too early to discuss finances, but your children are already learning some of the important basics like wants vs. needs.

“My wife and I have lived by the philosophy that the earlier you speak with your kids about money, the better,” says Andy Hill. “Knowing that financial habits are formed by age 7, we were teaching smart money lessons to our kids by age 4.”

Hill and his wife used the grocery store and other shopping experiences as a way to teach their two youngsters, now 5 and 7, about the difference between needs and wants.

“We need clothes, water and food, but we don't need a pack of trading cards, even though they might be awesome,” jokes Hill.

While it might sound quite young to start talking about money with your pre-schooler or kindergartener, kids this age can easily contextualize doing an action (such as a chore) in exchange for money as well as exchanging money for something they want. Hill’s rule of thumb is to “pay” AED 4 per year, so his 7-year-old would earn AED 28 by completing three to five age-appropriate chores around the house.

Once his children earn their allowances, Hill has them set 10% aside into Give Jars, and once a quarter each child gets to pick a charitable foundation to donate his or her money. Hill and his wife will then match the donation. The couple also have their children save 10% of their allowances.

As your children start to understand the general concept of money, the next step is to let them start making decisions.

7- to 10-year-olds

Lessons: Entrepreneurial thinking and allowing the child to make decisions.

It’s important for you to start figuring out what motivates your child and marry those motivations to earning, saving and spending. A classic example is going back to Murset’s earlier point of not simply handing over money and instead encouraging your child to both earn and save in order to buy items or experiences he or she wants. Bell deployed this technique with her daughters.

“From an early age, my girls learned about savings because they had to save up for extra items they wanted,” says Bell. Bell encouraged her daughters to engage in entrepreneurial endeavours such as a lemonade stand or babysitting in order to earn extra money for things they wanted to purchase on their own.

Jayne A. Pearl recommends having your child set savings goals by listing a few items the child wants to buy that are under AED 100. This opens up the opportunity for you to discuss savings strategies with your child and help them evaluate how long it will take to reach a goal.

Pearl, co-author of Kids, Wealth and Consequences: Ensuring a Responsible Financial Future for the Next Generation, also suggests you contextualize the household budget for your child. After her own son asked her how much she earned when he was 8, she sat him down and listed out the family’s monthly expenses.

“I assured him I earned enough to cover expenses, but sometimes an appliance or the car breaks,” says Pearl. “And while I try to save for those things, a really big sudden expense can be stressful and even set me back. Which is why sometimes when he asks me for things, I might say it’s not in the budget.”

Murset believes you can even take it a step further and encourage children in this age bracket to participate in their first stock experience using fractional shares. “Let them buy what they like,” advises Murset. He recommends letting them buy a tech stock if that’s an area of interest or shares of a motor vehicle company if they’re into cars.

While “buying what you like” isn’t always traditional investing advice, Murset suggests this technique to get your child engaged in the process and learning about how the stock market works. Not ready to let your kids make a few investment decisions? Well, next up, it’s time to release the reins a bit.

11- to 14-year-olds

Lessons: Banking and bills — give some financial autonomy in banking and purchasing decisions.

As your kids turn into tweens and teens, it’s time to offer up some autonomy over their finances. Pearl suggests starting with a trip to the bank to open a savings account for the child. You can even offer a parental-matching program and match what they save for certain purchases.

“Giving your kids the responsibility to pay for a certain bill or expense in their life, like clothes, can help them understand how money works,” says Hill. “When you run out of it, you can't buy things you want or need.”

Allowance or money earned from entrepreneurial ventures can be used to make those purchases. And don’t be afraid to let your kid make a decision you know isn’t going to end well. “Failure is okay here,” says Hill.

Allowing children to make their own purchases perfectly transitions you into the next stage — which is arguably one of the hardest for many parents.

15- to 18-year-olds

Lessons: Require your child to earn their own money and make spending decisions.

It might come as a shock to parents that you should start transitioning out of your role as their financial benefactor in your child’s late teens. After all, you probably still want to be the protector and feel they have a lot left to learn about life. But the reality is, it’s time to start preparing them to strike out on their own so the transition out of the nest is less of a shock.

“You want to go out on a date? You pay for it,” says Murset. “You want to take a long drive? You put gas in the car.” This isn’t to say you pull all financial support, but that you allow your child even more autonomy when it comes to money. It’s also helpful to allow them to make mistakes, like spending money on trendy clothes they’ll outgrow quickly or a gadget in which they quickly lose interest.

Offer financial wisdom, even if you’ve made mistakes

It’s not uncommon for parents to be fearful of teaching their children about money. After all, maybe you don’t have your financial life together, so what gives you the right to teach them?

“Start where you are and teach them what you do know,” recommends Hill. “Share the mistakes you've made and how you're trying to correct them.”

Pearl, too, advises using your mistakes as teachable moments. “For instance, losing a receipt and then needing to return an item,” says Pearl. “Impulse purchases such as buying things you don't need just because they were on sale.” These money mishaps can also be used to teach teens much-needed information, like how interest works on a credit card and how to pay off a revolving balance.

But it doesn’t have to be all about the bummer moments. Hill suggests you include them in the upside too. “Involve them in your financial wins so they can see what celebrating yourself looks like.”

You can also share in the celebration of good financial habits, like hitting savings goals as both child and parent, which in turn helps everyone build a healthy relationship with money.

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