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Can Middle Schoolers Learn to Make Smart Money Choices?

Key Points
  • Learning about money should be a hands-on experience.

  • Start with an allowance, and then add in a budget and savings goals.

  • Let mistakes teach lessons about money management.

Dear Carrie, 

My 12-year old seems to think I'm a money machine. I don't always give in when she asks for something, but how do I get her to make good choices herself?

—A Reader 

Dear Reader,

To me, teaching kids how to make good money choices is one of the most important things a parent can do. I have long felt this way, so I was especially pleased to see this sentiment corroborated in a 2016 report published by the Consumer Financial Protection Bureau that stresses the crucial role parents play in their children’s financial education.

According to this report, children begin to acquire the building blocks of financial capability as early as preschool and continue to develop them as they become teens and young adults. So while it may be natural for your daughter to constantly ask you for money, your instincts are correct. You can help her far more by holding back and following some simple guidelines.

As a starting point, learning about money should be a hands-on experience. To really understand how to make good choices, kids have to have some money of their own. I'm a big proponent of giving kids a sense of financial control early on. An allowance is usually the first step. So if you haven't yet established a regular allowance for your daughter, now's definitely the time. If she's already getting an allowance, you might want to evaluate whether it's enough—and then insist she use it to cover certain things, including some of the “extras.” You may be surprised how quickly she learns to manage her own spending.

As an example, a friend of mine increased her son's allowance so he could pay for lunches at school himself. It wasn't long before he was packing his own lunch and saving that extra money for other things he wanted!

Create a budget together

First sit down together and list the things you expect your daughter's allowance to cover— lunches, movies, video games, maybe certain clothes. This would be the perfect time to suggest that savings also be listed as a budget item. Now add up her current allowance for the month plus any extra money she might get from gifts or a job. Have her do the math. Is she coming up short? If it's time for a raise, decide together on a reasonable amount that will cover her expenses—and make sure she understands that it's up to her to prioritize her spending to make it work.

For an added lesson in budgeting, let your daughter plan a family trip or outing. Give her a set amount to work with and have her research and estimate expenses. Help her be creative in making choices that fit within the budget.

Set up a real savings goal

To me, learning to save is one of the most important money management lessons. And there's nothing like a goal to bring it to life. So while you're talking about budgeting, also have your daughter write down a real goal—say a special evening out or a new phone. Having something concrete to save for will make it easier for her to set aside a certain amount from her monthly "income." To encourage her, you could offer to match a portion of her savings.

As a further inducement, help her open a savings account at your local bank and talk about how interest works. See if your bank manager has a little time to talk to your daughter and perhaps give her an online banking demonstration. Following the growth of her savings online could be a real motivator.

There are also plenty of online savings calculators that can help your daughter figure out how long it will take to reach her goal. That's a great lesson in itself!

Let mistakes teach the hard lessons

It may be a cliché to say we learn from our mistakes, but when it comes to spending, they're a pretty effective lesson—as long as we're allowed to fail. So as hard as it may be at times, don't always come to the rescue when your daughter finds she's overspent. Instead, help her identify "spending leaks" and talk about ways to fix them. Suggest an online monthly budget planner to help her see clearly where her money is going.

Don't hide your own money concerns

Many parents avoid talking to the kids about family finances, but if you want to give them a sense of financial reality, you've got to show them the money. Without burdening your daughter with details, share with her how you budget, what you save (especially for her education), and the choices that are necessary to make ends meet. Knowing that you also have to prioritize may be an eye-opener.

At 12, your daughter is on the cusp of even bigger financial decisions. It won't be long before she can consider things like a part-time job and a car. Use these milestones as opportunities to discuss credit and debt, saving for retirement, even investing. Far from boring, she may find these ideas exciting as she anticipates and experiences greater financial independence.

Have a personal finance question? Email us at Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.


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