Believe it or not, someday, your 12-year-old will use credit cards or buy their own home. It may be a long way off, but you can prepare them to navigate those future roads by establishing some good habits now. NY1's Tara Lynn Wagner has more in part four of her "Money Matters" series, "Teach Your Children".
It's a line most kids hear at least once: Money doesn't grow on trees.
It's catchy, but it's hardly all kids need to know about personal finance. Unfortunately, for many middle schoolers, that's as far as the conversation goes.
"Everybody is very interested in money, and they want to have a lot of it as they grow older," says Diane Keating, executive director of High Water Women. "But they have no idea about how to earn money, how to save money, how to avoid the pitfalls of credit card debt."
Keating's nonprofit organization, High Water Women, teaches financial literacy to thousands of middle school students every year. However. much of what they cover can easily be taught at home. For instance:
"My mother has told me plenty of times that I shouldn’t waste money on things I don't need and I should learn how to save it," says one student.
The key, says author Beth Kobliner, is to establish the rule of the dime.
"Always save a certain amount of money, I'd say at least a dime for every dollar you earn," Kobliner says. "You can say 10 percent, but kids understand dime for dollar."
To help encourage saving, have them save toward a goal, like a particular gadget or toy. But make sure it's an amount they truly have the means to save, because the real goal is to have them experience the satisfaction of successfully saving for something they want.
While you are at it, experts say now is also a good time to introduce the idea of interest by offering a matching plan, an incentive that works on kids and adults alike.
"That’s really powerful, sort of like a 401k," says Donna Rosato, senior writer of Money Magazine.
"If your child wants a new bike that is $100, you may say, 'You save $50, and we’ll match you $50," says Linda Descano, president and CEO of Citi's Women and Co. "Or, every time your child puts $1 in his or her piggy bank, you match it with 25 cents."
And finally even though your 12-year-old can't open a credit card, Kobliner says to explain that a credit card is essentially a loan. She also says to explain what happens if you don't pay it in full.
"I would be charged interest, and that means that what I am buying is way more expensive now," she says. "Teaching that to a middle schooler is a very powerful lesson."
It's a lesson that will save them a lot of money in the long run.