Gail Winslow, a financial advisor with RBC Wealth Management in Washington, D.C. and mother of six (and grandmother of six more), says she gave her kids an allowance when they were eight years old, and immediately began teaching them the basics of managing money.
“If they wanted to buy gum with their allowance, they could, but if they wanted something bigger they had to learn to save for it,” says Winslow. “If they didn’t have the money saved, they didn’t get it.”
Think that’s young? Darla Kashian, a financial advisor and first vice president with RBC Wealth Management in Minneapolis, says that kids as young as three-years-old understand that you exchange money to buy things. She gives her two children—ages five and eight—
“It’s so important to teach kids about saving for the future and to express your family values,” says Kashian. “We actively save money for our philanthropic activities and talk to our kids about it.”
Winslow and Kashian have a wealth of information to impart to their kids, but here are three lessons they agree are essential.
1. Pay yourself first
“Put away money from every single paycheck starting with the very first one you earn,” advises Winslow. “Don’t wait until the end of the month because there won’t be anything left.”
Kashian says that understanding how compounding interest works is crucial to growing wealth. “The ability to postpone gratification now for greater things in the future is a lesson that should be taught as early as possible. Understanding the power of compounding interest is a part of that lesson.”
“Every child should be taught to be mindful of what each decision they make means for their financial future,” says Kashian.
2. Understand how debt works
Kashian requires her kids to have cash with them if they want to make a purchase. As she puts it, “I’m a human being, not a bank.” And she’s already talking with her children about how to pay for college.
“My goal over the course of their growing up is to have transparency,” she says. “I want to make sure that none of our expectations come as a surprise and that none of the financial realities of life come as a surprise.”
“Do not ever charge anything you can’t pay for,” warns Winslow.
But Winslow also says that part of understanding debt is knowing that the occasional debt can be financially beneficial. She says one of the best investments in the world is a 30-year mortgage, especially when interest rates are under four percent.
3. Integrate your values with your money
“Integrating your values and your money means that teaching your kids about money becomes part of a bigger mission,” says Kashian. “If they learn to think about their values while they’re making decisions then it’s easier to understand when to save for the future and when it makes sense to spend money.”
When her children buy something with their own money, Kashian pays the sales tax. “I want them to understand that I believe in taxes as a way to support our community,” she says.
Kashian comes from a working class family that didn’t have extra money to spare for the violin lessons she wanted to take. After some family discussions, her father agreed to pay for every other lesson if she could pay for the rest.
“I never missed a single violin lesson because I understood what it cost,” she says.
Kashian says she wants her children to understand their privilege to be raised in a household with money, and to know that the money comes from the family’s hard, honest work. She says parents and grandparents need to learn to articulate the planning, the sacrifices, and the savings required to provide special experiences for their children and grandchildren.
Final thoughts on money lessons for kids
“Teach your children to be reasonable with their money—and not extravagant—and to save, save, and save some more and they’ll live a secure life,” says Winslow.
Kashian says that parents shouldn’t be nervous about teaching their kids about money.
“It’s kind of like the ‘New Math’ — just stay one step ahead of your kids and learn alongside them if your experience growing up wasn’t optimal,” she says. “It doesn’t have to be super-complicated.”
This article first appeared on Forbes WealthVoice.