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Teach kids to be smart with money

Whenever I ask kids where they learned what they know about money, the answer is always the same. Whether it's inner city elementary school kids or elite private high schoolers, their primary source of personal finance information is their parents.

Scary, no?

It's bad enough we're responsible for teaching them about subjects we understand -- hygiene, manners, nutrition -- but we have to counsel them in matters we don't even grasp ourselves?

The good news is, when it comes to money, we understand more than we think we do.

This road map from personal finance website Women & Co. gives an idea of what financial concepts children can handle at each age:

Ages 4 to 6. The abstract idea of saving money for later rather than spending it now is a difficult one even for adults to tackle. Piggy banks help. When kids see something tangible -- coins and bills -- stacking up over time, they get it.

Ages 7 to 10. Kids this age can start to understand the concept of earning their own money. Now is the time to start arranging chores children can perform for financial reward. Monetize the chore in a way that shows them the more they do, the more they earn. For example, Lisa Caputo, founder, chairman and CEO of Women & Co., and Linda Descano, the company's president, suggest having kids rake leaves, then paying them per bag of leaves collected.

Ages 10 to 13. Kids this age begin to grasp the concept of credit and lending. And what better time to learn what a bum deal buying on credit can be than now, when the stakes are low?

When children begin to pester you for the latest designer sneakers or fad toy their allowances are not big enough to cover, sit them down for a lesson on credit. If they decide they'd like to try it, come up with a contract outlining the terms of the deal, complete with a pay-back schedule and interest rates.

To best prepare them, forget parental leeway. Love them enough to let them experience the negative consequences of such things as missed payments and paying for an item long beyond the time they've stopped caring about it. Would you rather they get the hint now with you or later with the bank?

Ages 14 to 19. Now we're in the big time. Kids are old enough to have part-time jobs or start their own business. It will give them great practice in a number of financial and life lessons, from saving and spending to using time wisely and behaving responsibly.

College students. With the opportunity to take on thousands of dollars in student loan and credit debt, now is the time to understand the concept of managing debt. Research loans together and calculate how long they will take to pay back.

Now that your child is more independent, it's a good time to discuss why it's important to have an emergency savings fund. That discussion should cover why a busted carburetor qualifies as an emergency, while a sale at Abercrombie & Fitch does not.

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