Q:

My teenager has no idea how to manage money.She constantly spends more on clothing and other items that are beyond what she can afford.How can I teach her about managing her finances as she will be out on her own in a few years? - Help

A:

Believe it or not, most teens think that their parents are the best ones to educate them about money matters. It is quite a responsibility, as there is so much to know, from using credit cards wisely to saving and investing to budgeting. And, unfortunately, every year, managing money becomes more complicated. You should not wait until your children are teens to start their financial education. It must begin as early as their preschool years. Because it is the start of a new year, here is our list of resolutions that will help parents turn their children into financial wizards:

For Preschool and Kindergarten

Resolve to teach your children the names of coins.

  • Empty your pockets and change purses, and let your children identify the coins and count them when they know their numbers.

Resolve to start your children on saving by giving them piggy banks.

  • This is most effective if they decide in advance what they are saving for.

Resolve to show your children that money is used to purchase things.

  • Let them use coins to purchase small items under $1.

For Elementary School

Resolve to teach your child the equivalent value of coins and bills as age appropriate.

  • Start with nickels, and have your child show that one is equivalent to five pennies.
  • Later on, your child can do the same for the relationships of the other coins. For example, the child could trade 10 pennies or two nickels or five pennies and a nickel for a dime.

Resolve to let your child count out the coins and later on bills to pay for a variety of items.

Resolve to give your child an allowance. Explain that a portion of this money should be saved.

Resolve to open a savings account for your child.

For Middle School

Resolve to introduce your children to the stock market through the purchase of one or more shares of stock in a company that they regularly make purchases from.

Resolve to suggest that your children start a coin collection and learn that some coins are worth more than their face value.

For High School

Resolve to teach your children how to balance a checkbook.

Resolve to show your children how to use credit cards wisely.

  • Let responsible children have a credit card with a prepaid balance instead of an allowance to give them actual experience in using a card.

Resolve to teach your children how much it costs to run a household.

  • Let them know what the electricity, phone, gas, water and cable bills are each month.

Resolve to show your children ways to make their savings grow, such as bank certificates of deposits and treasury securities.