Thirteen years old
Teens spend about $200 billion a year on toys, games, clothing, movies, live events, arcade games and electronics — all forms of immediate gratification that run counter to sound long-term money practices. Your 13-year-old is about to chart a course through this wasteland of spending and would benefit from having a grip on a few core concepts. By now, she should be well acquainted with saving and understand how impulse and peer pressure can set back her longer term goals. She should be able to research products, comparison shop, and make good decisions about what offers the most value. Your budding teen should also be skeptical about advertising claims and familiar with identity theft. She should know how to fill out a job application, be able to set up a personal spending budget, and understand the difference between stocks and bonds and mutual funds. Her three jars should be emptied; the money should be in a bank account with check-writing and ATM card privileges and she should know how to make deposits and withdrawals and track her balance.
Advice: Look for easy ways to teach money lessons. When you shop and pay by credit card explain to her (briefly, please) that the bill will come later — then show her the bill when it comes. While you're at it, show her the lines on your credit card statement for interest expense and late fees and explain why you do or do not have such expenses. Directly deposit a weekly allowance into her bank account and make sure she understands what that money is for — and do not bail her out if she spends too much and has to stay home on Saturday night for lack of cash. Increase her allowance for clothing expense, and let her make the decisions on what to buy. Introduce her to the stock market through low-cost programs like those at sharebuilder.com or mystockdirect.com — and challenge her to a stock-picking contest. "Kids learn best through games," says Lewis Mandell, a leading scholar in the financial education movement at the University of Washington Business School. "The lessons are immediate, fun and real." Kids who play stock market games tend to perform best in financial literacy tests, Mandell says.