personal finance

3 Ways Parents Can Make Their Kids Smarter With Money, According to a CPA

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Parents shouldn't wait until their kids are old enough to have an allowance before teaching them about money.

That's according to Ken Eyler, certified public accountant and CEO of Aquilance, a financial services company dedicated to "highly affluent families."

Over his 31-year career advising high-net-worth families, Eyler has watched upwards of 100 kids grow into adults. He advises his clients to start teaching their children about money young, around age 5 or 6, in order to help them build lifelong habits and a positive relationship with it.

"By the time they are 11, 12, 13 and starting to reach adolescence, they should be fairly well-versed in how money works in society," he tells CNBC Make It. "Money is a tool, and having that for whatever purpose is really important."

From savings to taxes, here are three pieces of knowledge he says all parents should consider teaching their children when they're young.

1. Teach them the importance of savings

One of the first things that parents should teach their children is the importance of saving money, Eyler says. His advice comes from experience: Eyler's own parents had rules about how he was allowed to spend any money he received when he was a boy.

"If I got $100, I could spend a third of it, I had to save a third of it and I had to find a third of it to do something productive with," he says. His options ranged from donating the money to running "a little business." The rules taught him that he couldn't spend everything he had.

"Having money set aside is absolutely crucial," Eyler says. "There are always life circumstances where you need some reserve of cash."

In addition to savings, having a basic understanding of investing and compound interest can be invaluable. Indeed, legendary investor Warren Buffett has called compound interest an investor's best friend.

2. Help them understand taxes

Children should also have a general understanding of taxes, Eyler says. This ranges from understanding why they are taken out of a paycheck to why they are added to the final price of something you buy at the store.

"The reality is every person in society pays taxes," he says. "I saw this with my stepchildren years ago. They were like, 'Wait, what's that?' when they bought things for themselves and suddenly a $10 purchase was close to $11."

Parents should also make sure their children understand why taxes are deducted for things like Social Security and Medicare. Helping children learn about taxes when they are young can help them avoid any unpleasant surprises once they start earning their own money, Eyler explains.

3. Walk them through your credit card statement

Familiarizing kids with common financial documents at an early age can also help them grasp important money concepts.

"That can be as simple as what a credit card statement is," Eyler says. "When I'm using a credit card, that doesn't mean I have unlimited access to funds."

Eyler suggests walking your child through your credit card statement and explaining things like your credit limit. "Having a $10,000 credit limit doesn't mean I have $10,000 to spend, because I can't pay that money back," he says.

Eyler adds that showing children expenses that are related to them — such as a payment for summer camp or a coveted toy — can "show them how life works."

"Help them understand that everything takes work and takes money," Eyler says. "That's good education at whatever level."

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