Yellen says the earlier children grasp financial issues and strategies, right down to exchanging goods and services for cash, the better. The best advice to getting those points across to children? Unplug that "cash machine" by teaching kids some time-honored traditions that can help them save rather than spend money this summer. Here are some tips for them:
- Wrap allowances around work and chores. Children as young as 4 can benefit from learning that money comes as a reward for work, Yellen says. "The amount the child receives for chores should be based on their age and what you expect them to use money for," she says.
- Stick to the "40/30/20/10 Savings Rule." Yellen says that when paying out that allowance, tell kids that 40% of their earnings can be used for spending, 30% should be set aside for short-term savings, 20% for long-term savings and 10% for donating. "If children sort their money into these categories every week, they will develop responsible lifelong money-management skills at an early age," she says.
- Explain "Wants" vs. "Needs." "If you tell your children one thing, but do another, they will catch on very quickly," Yeller explains. "Explain how there are things you'd like to buy that you decided to forgo and why." She also advises holding regular "family night" discussions to share family budget and show kids where the money is going.
"As parents, one of our most important lessons for our children is to teach them the lifetime value of being financially responsible and self-sufficient," Yellen says. "Nothing builds a child's self-esteem faster than self-reliance." That's good advice for kids anytime of year.