What should children entering their teenage years - say, 11 to 13 years old- start learning about money?
Answer: As children enter their teenage years, a key to developing a savings habit is learning that the sooner you start saving the easier it is can be.
Here are some milestones and activities you could try with your teens:
You should save at least a dime for every dollar you receive.
- Encourage your children to always save 10 percent of the money they get.
- Have your children set a goal to buy something they want, and have them work toward that amount.
- To reinforce the savings habit, go to the bank two to three times a year with your children to deposit savings into their accounts, and look at how much bigger the balances are on each visit.
- Consider a "matching plan" for your children's savings: You put in 25 cents for every dollar they save.
Entering personal information, like a bank or credit card number, online is risky because someone could steal it.
- Discuss the dangers of entering personal information online.
- Explain that thieves can use Social Security numbers or other personal information to open credit cards or create fake documents.
- Explain that "free" offers online, such as cell phone ringtones or games, can be scams to get people to spend money without realizing it.
- Make it a rule that your children never answer emails from someone they don't know and never click on pop-up ads.
- Go to ftc.gov/idtheft for tips on information security.
The sooner you save, the faster your money can grow from compound interest.
- Compound interest is when you earn interest on both the money you save and the interest you earn.
- Show your children the following: If they set aside $100 every year starting at age 14, they'd have about $23,000 at age 65. However, if they begin saving at age 35 they'd have about $7,000 at age 65. Assume the account earns 5% every year.
- To compute compound interest, use the calculators at investor.gov.
- Discuss how much your child can save. What will he have to give up? Is it worth it?
Using a credit card is like taking out a loan; if you don't pay your bill in full every month, you'll be charged interest and owe more than you originally spent.
- Discuss why you should not use a credit card to buy something that you can't afford to pay for with cash.
- Look at credit card offers online with your child, and compare the interest rates.
- Using the Credit Card Repayment Calculator at federalreserve.gov, see how long it could take to repay a $1,000 credit card debt by making the minimum monthly payments.
- Discuss how a credit card can be useful for making purchases online, or as a convenience.
For more money activities for your child, visit our Money As You Grow section.