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 endeavors 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 $10. 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.