TODAY   |  September 19, 2013

How to raise your child to be money-smart

One of the most important lessons you can teach your kids is how to manage their money. TODAY financial editor Jean Chatzky shares her guide for helping young people learn fiscal responsibility.

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This content comes from Closed Captioning that was broadcast along with this program.

>> back now with common sense strategies to teach your kids about money. it's never too early to start. new research shows kids are absorbing financial lessons much younger than thought.

>> gene shatzky is here to tell us.

>> this new study from the university of cambridge , kids are absorbing lessons as young as age 7. 7. hand the they're watching what we do. so we have to be really careful.

>> so we have broken this down by age group . we will start age 5 to 9. how do you talk to them about money?

>> the first lesson is money is a limited resource . the only way they will learn this is by having some money, spending it, preferably on something they regret and you as the parent cannot bail them out. they have to learn, once it's gone, it's gone and there are no do-overs in many, many cases. all right. they also at this age node to learn the importance of saving. the only way most kids will do that if if you force them to save part of their allowance. i'm a fan of allowance and you can also match what they're saving so they can get to the bigger reward faster. so if they want to save for an expensive american girl doll, if they want to save for a gaming system. match what they are doing.

>> let's move next 9 to 11.

>> so at this wage, kids can get the concept of value. so when you take them to the grocery store, have you this ongoing conversation with them about things like unit pricing and things like when post is on sale, kelloggs isn't, vicar is sa. get them into the game by making them the coupon clipper for your family. give them half of what they save you and they'll be totally into it.

>> we end up showing them the generic brands.

>> proprietary.

>> versus the name brands.

>> also a great lesson, within they taste it, they can't tell the difference.

>> i buy one name brand , replace it inside with a generic.

>> you are father of the year.

>> all right. let's go age 11 to 15. now, kids are starting to earn their own money.

>> kids are starting oearn their own money. when kids work ages 11 to 15. they actually get to be much better financial managers as adults. so you want to encourage them to go out, to baby-sit. you want a list of things at home that they can do that you will pay them to do if they have trouble finding employment outside. this is the age where we teach kids about credit and debit. i started my kids on debit card around age 12 or 13 and started giving them their alounts electronically. they can put the apps on their phone. you pay have to be the bank before they drive. they can then watch you transfer money back into yours. if you link an account, you don't have to worry about the men mum balance as long as you keep it in one place.

>> high school into college.

>> kids need to understand how much they will have to borrow. i think it's really important for them to understand how much they'll have to pay back on a monthly basis once they fwraut. so help them run the calculationts. then sit down with them with books like these. physical out, this is the value. this is what it will cost. this is how much you the child are in for. let them help make the decision on that basis.

>> let them know they're probably not going to get a free ride.

>> no, absolutely not. if they're going to be paying back student loans, they need to know how much money they will have to earn in their job in order to make these payments and not come home to live with you, which no one wants.

>> we are back in a moment. in is "today" on nbc.

>> the stars of "america's got talent."

>> you guys are amazing.

>> oh, yeah.

>> is this a twerk?

>> give us a little something.