Age appropriate money lessons: Ages 11-13

Ages 11-13

The Lesson: The sooner you save, the faster your money can grow from compound interest.

At this age, you can shift from the idea of saving for short-term goals to long-term goals. Introduce the concept of compound interest, when you earn interest both on your savings as well as on past interest from your savings.

Activities For Ages 11 To 13

  1. Describe compound interest using specific numbers, because research shows this is more effective than describing it in the abstract, says Beth Kobliner, author of the New York Times bestseller Get a Financial Life. Explain, “If you set aside R1000 every year starting at age 14, you’d have almost R600 000 by age 65, but if you start at age 35, you’ll only have R120 0000 by age 65.”
  2. Have your child do some compound interest calculations on Investor.gov. Here, he / she can see how much money they’ll earn if they invest a certain amount and it grows by a certain interest rate. And have them read this inspiring example of someone who used compound interest to his advantage incredibly well.
  3. Have your child set a longer-term goal for something more expensive than the toys he / she may have been saving for. “Those sorts of tradeoffs, called opportunity costs — what are the things you’re giving up to save money — is a very useful thing to talk about. At this age, kids are trying to “not” save because they want to buy stuff, but thinking of what long-term goals are and what they’re having to give up shows that it’s a good decision,” says Kobliner. For example, she says, if your child has a habit of buying a snack after school every day, she may decide she’d rather put that money toward an iPod.