Teaching children about money issues will ensure they deal with finances responsibly when they are adults. Bad habits that are developed early may stick with kids for a lifetime. Therefore, it is important that parents teach their offspring about money issues as schools usually don’t touch the subject. Here are a few things that children should know about finances.

By the age of five kids should understand what coins are worth. They should be able to differentiate between coins and their value. By the age of nine, your child should be able to make and count change, read price tags and know how to earn a little extra money by selling lemonade or doing some additional work. Dan Kadlec of the Times suggests giving young children a weekly allowance of about half of their age in pounds that together with any birthday money they should keep in three separate jars – 60% for immediate spending, 30% for saving for a specific goal like a new game and 10% for charitable spending. Parents should let the kids spend their money anyway they want within those bounds. This will teach children the difference between short and long term goals and predispose them towards charity.

By the age of thirteen your offspring should understand how impulses and peer pressure can set back long-term goals. He should be able to research products, make price comparisons and chose the best value. The weekly allowance should now be transferred to a bank account with ATM card privileges. He should know how to make a deposit and keep track of the balance. Increase the allowance for clothing expenditure and let your kid choose on what to spend it. It’s important to not bail your kid out if he ran out of money and has to stay at home on a Saturday night for lack of cash. Teenagers should understand that money is not growing on trees.

By the age of eighteen your child should have a credit card in addition to the debit account. But make sure he understands everything about credits. Young adults are often appalled to learn that a £5,000 credit can take up to 20 years to pay off through minimal payments. It’s important that your kid knows how important it is to pay bills on time, understand late fees and interest expenses. If you still pay allowance, do it in bigger and less frequent chunks (once a month or every quarter) so he has to create and live with a budget. Keep reinforcing saving efforts by offering to match his long-term savings with £1 for every £2 he puts away.

By the age of 23 your child should know everything about money there is to know. He should understand the difference between stocks and bonds, the advantage of owning instead of renting and what kind of loans and expenses are tax-deductible. Your child should be an independent young adult now and have a healthy relationship to money. Otherwise, the most important thing you can do for your child at this age is to cut him off from financial support. That will force him to come to grips with issues he’ll be dealing with long after you’re gone. Besides, research shows that kids who get taken off their parents’ dole in a timely fashion, on average, pull in 20% more lifetime earnings.