Recently I had an opportunity to speak with a class at Pacific University, in Forest Grove, Oregon. We covered a variety of personal finance topics. I’ve done this before, and I’m always struck by the fact that young people are largely unprepared to live in the world of personal finance.

There are many reasons for this. It’s not taught in schools. Often parents themselves don’t understand the concepts. When quizzed about basic financial literacy topics, most Americans only score about a C minus. But a big obstacle is interest.

When talking with kids, or anyone, about money, you have to meet them where they are. The topic has to match not only their skill, but their interest. As with most skills, if the topic is not currently relevant, it is too abstract. Here is what I’ve learned from the literature and my own experience:

Elementary School Kids

Once kids are in the third grade, they have enough math skills to do a bit of money management. Your kids should have some money available to manage on their own, whether it’s from doing chores or an allowance. Have them save up for the things they want that are not necessary to everyday life. Help them understand the process for saving. How much money will they put aside each week? What are they willing to do for the thing they want, such as extra chores or giving up other ways they spend their money?

It’s important that kids truly have a choice. This is one area where I routinely got it wrong with my own kid. I remember vividly the day she wanted to spend $5 for a pony ride. I lectured her about how many weeks of allowance it took her to save $5 (though she wasn’t saving for anything in particular) and how short the ride was going to be. I should have just let her get on the pony.

Older elementary school children have the ability to understand the concept of debt. While I don’t encourage taking on debt for things you can reasonably get by saving ahead, it’s not a bad idea to let your kids have the experience of owing you money.

If they have something large on their wish list, consider letting them borrow the money from you to be paid in installments over a time you choose. Make a contract with them that clearly states what they will pay each week and how long it will take to pay you back. Talk to them about how they will raise the money for the payments.

Middle School Kids

Middle school kids can start to learn more about creating a budget. You can give them control over some of their needs as well as their wants. Give them a reasonable budget for things like their school clothes and supplies, and let them make their own choices about how to use it. Show them alternates to their choices, but let them make their own and live with them.

They can also understand the cost of living. Consider having your kids participate in paying the bills with you and making some family decisions. For example they could help plan a vacation, making choices that fit in your budget. Or you can work together to save for something the whole family can enjoy, like a new television.

High School Kids

In high school, you can add in activities that involve more complex financial concepts, but you are losing their interest. From here on out, you need to focus on things in which they will have a personal stake. College is a good one. Most parents have not saved enough to cover the full cost of college. Kids need to understand where the money is going to come from.

Make your family situation clear to them, and explain how they can help themselves. Good grades and extra curricular activities can result in scholarship money. After school and summer jobs can help them pay for books and room and board. And most importantly, their choice of schools will have a huge impact on how much money your family has to come up with.

If debt is going to be part of the picture, estimate their monthly payments now. It will help them understand the impact of the choices they make. You can estimate payments for different loan amounts at StudentAid.gov, and you can find more resources to help your child understand their options at the same site on this page.

College Age

College students are living on their own to some degree, and it’s a great time for them to begin to understand how the world works. College students should begin to pay some of their own bills. Likely candidates are cell phone bills and car insurance. If they are not living in the dorms, have them manage rent and utility payments and groceries, even if you are providing the funding.

When your child starts looking for work, with or without college, help them understand company benefits. Even some internships offer health insurance and an opportunity to participate in retirement plans. Help them understand how these benefits work and why they should participate. It’s also important to talk to them about building an emergency fund. How much they need, how they will save it, and why it’s important should all be understood.

It’s hard to get young people to begin thinking about retirement, but if they start participating in their company retirement plan early, it will reduce the amount of money they need to save out of their paychecks for the rest of their lives. I’ve found illustrating how a company matching contribution works is miraculous in getting these newly minted workers to participate. Here is a simple example you can use:

• Your young person contributes $100
• Since the contribution is before tax, only $80 comes out of their pay
• Their company matches their contribution with $100
• They have saved $200, and only $80 has come out of their pay.

Talking to kids about money is hard. You want to protect them from the cold world realities as long as possible, and as a culture, we’re just not good at talking about money period. The hard part is even if you do everything right, which you won’t, sometimes they just don’t listen. I wrote about how my own efforts didn’t help my daughter avoid going into the financial ditch in this post. But keep in mind, every lesson you teach stays in their heads somewhere. They’ll remember when the time comes.

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Photo by Sharon McCutcheon on Unsplash

Save Yourself; Your Guide to Saving for Retirement and Building Financial Security, is available on Amazon.