Suze Orman: Kids Should Learn Family Finances by Age 12 — Here’s Why
Written by
Laura Bogart
Edited by
Kristen Mae
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
There are very few things people are born knowing how to do. If babies need to be shown how to talk and taught to read, it stands to reason that they’re not going to come equipped with personal finance skills. Just as you need to model language skills and hold their hands while they take their first steps, you also need to teach your little ones how to manage their money.
According to author and financial expert Suze Orman, the sooner you start, the better. Orman wants families to start before their little ones turn 12 years old.
“As parents, it’s up to us to teach and show our kids the value of money,” she wrote on LinkedIn. “By age 12, I encourage you to involve your children in the family finances. Have them sit with you as you pay the bills — not to make them feel grateful for what you provide, but to help them understand what life really costs.”
Starting early can help prepare your children to be financially independent adults. Orman has some tips on how you can begin.
Show Your Kids That Fun Doesn’t Have To Cost Money
If every family activity involves going out to a restaurant, playing mini-golf, or shopping at the mall — or any costly adventure — your children are going to associate fun and connection with spending money.
Orman has had to correct her own family on this misconception. In an interview with People magazine, Orman shared that she stopped her niece from a large splurge on art supplies and toys meant to entertain her kids during the quarantine. Ever the good aunt, Orman told her to focus on showing the kids how to have fun with items they already owned or to look to Pinterest for crafting ideas using toilet paper rolls and empty milk cartons.
By showing your children that good times don’t need to cost more than your imagination and a willingness to get creative, you can prevent them from adopting a harmful money mindset where they believe they can’t have a good time without spending big. Learning this lesson early can help reduce their vulnerability to impulse buying later.
Let Them See How You Budget
Learning how to budget is far from a one-and-done endeavor. You can start by showing your children how you assemble your household budget in age-appropriate ways, while emphasizing the importance of accounting for all the money that comes in and out of your home and paying your bills on time.
Orman recommends a simple yet effective way to teach budgeting: Deposit your teenager’s allowance in a new checking account that you both share jointly. She advises that the only money in that account should be money you deposit, either every two weeks or every month.
“But make it long enough so your child starts to think about how to make the money last until the next deposit,” she said. “As part of this, lay out what you expect them to pay for. Clothes? Meals out? If they run out of money (by the way, do not sign up for overdraft protection on this account) before it’s time for your next deposit, that’s their problem, not yours!”
However, if your child struggles to allocate their funds at first, Orman doesn’t want you to scold or shame them. Remember, this is a teaching opportunity. Remind your child that they’re still learning, while gently helping them identify where they might have overspent or failed to prepare.
Have “The Talk” About College Finances
One of the most common issues affecting young adults’ personal finances is student loan debt. That debt has the potential to limit other financial milestones, like saving for a down payment on a home. However, you can nip those issues in the bud early if you take Orman’s advice and start talking about college finances around the time your kid turns 13.
She wants you to have “clear-eyed conversations” about what your family can afford at least five years before your children have to consider where they want to apply for school. Being aware of what they’ll need to earn in scholarships could inspire them to be more studious or take on extracurricular activities earlier.
Orman also wants you to emphasize that your kid shouldn’t borrow more in student loan money than they’d reasonably expect to earn in their first year of work after they graduate. That may mean letting go of their initial idea of a so-called “dream school.” While it may be an upsetting realization at first, Orman believes they’ll come to appreciate it later.
“I have news for you: The more affordable school will be their dream if it means they emerge from college without crushing loans,” she said. “They might not thank you for the lesson at 13, 14, 15. But just be patient. At 23, 24 and 25 they are going to be so grateful.”
More From GOBankingRates
