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It’s never too early to begin teaching your kids about money. But doing so is not as straightforward as you might assume. Some parents don’t feel confident enough in their own knowledge of financial matters to be comfortable teaching their kids about money. Others believe it’s inappropriate to burden young children with conversations about money or think, mistakenly, that children are too young to understand financial concepts.
In fact, researchers from the University of Wisconsin-Madison studied the behaviors and attitudes of fourth and fifth graders who were exposed to financial education and concluded that “younger students can learn financial topics and that learning is associated with improved attitudes and behaviors which, if sustained, may result in increased financial capability later in life.”
Beth Koblinger, author of the New York Times bestseller “Make Your Kid a Money Genius (Even If You’re Not),” wrote an article for NPR’s Making Sen$e in 2018, in which she described her encounters with parents of all economic backgrounds during a recent book tour. She realized that all parents, whether very wealthy or middle-income earners, had the same questions:
- When should I start talking to my kid about money?
- How do I teach the value of dollar?
- How do I convince my kid that college is worth it?
In her book, Koblinger emphasizes the fact that opportunities to talk to kids about money happen naturally as we go about our daily lives. Parents can take advantage of these “teachable moments” when they arise to help their kids begin building the foundation for a lifetime of financial success.
Lessons & Activities by Age
Researchers from the University of Minnesota suggest focusing “children’s education about money on the concepts of earning, spending, saving, borrowing, and sharing.”
In her paper “Practice Makes Perfect: Experiential Learning as a Method of Financial Socialization,” University of Arizona doctoral student Ashley LeBaron explores the effectiveness of hands-on learning opportunities for teaching children about money.
LeBaron concludes that parents should teach their children about money through example, explanation and applied practice.
“I think it’s hard for parents, sometimes, to let their kids make mistakes,” LeBaron said. “It’s tempting to just shield kids from everything related to money, but it’s really important for parents to get money into kids’ hands early on so they can practice working for it, managing it and learning how to spend it wisely.”
Preschool and Kindergarten: Ages 3 to 5
Children as young as 3 years old understand basic economic concepts, and by age 7, kids have developed permanent financial habits.
This is a good time to start explaining that material goods cost money. Give them a piggy bank, or better yet, help them establish spending and sharing jars, which will allow them to see what happens to their balance depending on the decisions they make.
Talk to your preschooler or kindergartener about sharing with others. Show them how to set financial goals and how to meet those goals.
And remember, parents have the greatest influence over children’s money habits, and at this age, your kids are looking to you to set an example and guide them.
Elementary School and Middle School: Ages 6 to 14
At this age, you can let your child help with the grocery shopping, walking them through your decisions to shop at certain stores, seek coupons and sales, and select certain brands according to pricing and your budget.
You should also begin discussing big-ticket items with them. Koblinger included an example of how a friend of hers used car shopping as an opportunity to teach his 10-year-old “smart ways to save, how to see through clever marketing, how to negotiate prices, and how to avoid the pitfalls of loans.”
You can even teach children this age about compound interest, using real data as opposed to trying to explain the concept in the abstract.
High School: Teens Ages 16 to 19
By the time your child reaches high school, he or she should be capable of understanding more sophisticated money management concepts and have a level of financial literacy that includes knowledge of earning, saving, spending and sharing at the very least.
Credit card companies target college students, so you’ll also want your child to be aware of the dangers of maxing out credit cards, how interest works, credit limits and the importance of building credit responsibly.
Talk to your teen about the value of money. This includes emphasizing the difference between wants and needs and making sure they know your values when it comes to money. These conversations won’t be easy, especially when they see their friends wearing designer clothes and whipping out their parents’ credit cards when they go out.
Just remember, you’re not alone. Every parent who cares about their child’s financial well-being and wants to instill positive values must say no to their kids at some point. And, just as your parents told you long ago, it’s for their own good.
How do you know if you’re on the right track? Below is a checklist that was adapted from “Money Sense for Your Children,” Alice Mills Morrow, Extension Family Economic Specialist, Oregon State University Extension Service.
- Do each of my children have some money to manage without my interference?
- Have I helped my children set up a spending and saving plan?
- Do I avoid using money as a reward or punishment?
- Do each of my children do some regular household chores?
- Do I set a good example by being truthful about money matters?
- Do I give my children more financial responsibilities as they get older?
- Am I a good money manager, giving my children a good example to follow?
- Do I allow my children to make their own decisions about money when there are alternatives?
- Do I praise my children if they have made wise decisions with their money?
- Do I help my children find ways to earn extra money that is age appropriate and suits their abilities and skills?
- Do I allow my children to make mistakes related to money and help them to understand the consequences?
- Do I sometimes verbalize my own desire to acquire more goods and services than my income can handle so that my children know that I say "no" to myself, too?
Software Applications for Teaching Kids About Money
There’s a fine line between preparing children to be financially responsible and tarnishing their relationship to money.
Miata Edoga, president of financial education company Abundance Bound, told Parentology, “We don’t want our kids to be afraid of spending, be afraid of managing credit. We want them to feel confident in their ability to negotiate successful financial lives, to come at money from a place of power, rather than fear.”
The information age ushered in new media teaching platforms and introduced the world to the “digital native.” New educational apps for kids are launched regularly. These technological tools use interactivity and gamification to make financial concepts fun for children and teens.
In addition to educating kids about core personal finance topics, these apps simulate the digital-era experience of using credit and debit cards, mobile payment methods, digital wallets, online banking and one-click shopping.
Jason Young, founder and CEO of MindBlown Labs, reiterated a well-known fact in a 2020 interview with Parentology, stating “research shows that people spend much more when transacting digitally than they do when using cash.”
While it can be a bit intimidating to teach kids about money, the rewards for both you and your child will far outweigh any frustrations the lessons may cause. And, fortunately, now more than ever, parents have a host of resources at their disposal, from apps and simulations to good old-fashioned discussions and real-life scenarios.
The most important thing is to convey the need for smart money management and allow your kids the chance to practice these skills in their daily lives.
8 Cited Research Articles
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- Batty, M., Collins, M., Odders-White, E. (2014, December 29). Experimental Evidence on the Effects of Financial Education on Elementary School Students' Knowledge, Behavior, and Attitudes. Retrieved from https://onlinelibrary.wiley.com/doi/full/10.1111/joca.12058
- Danes, S.M. & Dunrud, T. (2005). Children and Money Teaching Children Money Habits for Life. Retrieved from https://www.cehd.umn.edu/fsos/research/ruralmnlife/pdf/moneyhabitsforlife.pdf
- Hensley, D. (2019, April 29). When it Comes to Money, Practice (and Mistakes) Make Perfect. Retrieved from https://parentology.com/study-when-it-comes-to-money-practice-and-mistakes-make-perfect/
- Kobliner, B. (2018, April 5). Money habits are set by age 7. Teach your kids the value of a dollar now. Retrieved from https://www.pbs.org/newshour/economy/making-sense/money-habits-are-set-by-age-7-teach-your-kids-the-value-of-a-dollar-now
- Koblinger, B. Make Your Kid a Money Genius (Even if You’re Not): A Parents' Guide for Kids 3 to 23. New York: Simon and Schuster, 2017.
- LaBaron, A.B. et al. (2018, November 14). Practice Makes Perfect: Experiential Learning as a Method for Financial Socialization. Retrieved from https://journals.sagepub.com/doi/10.1177/0192513X18812917
- University of Arizona. (2018, November). Parents: To prepare kids financially, give them practice with money. Retrieved from https://www.sciencedaily.com/releases/2018/11/181127092523.htm
- Wellbank, L. (2020, October 1). Best Apps that Teach Kids Personal Finance. Retrieved from https://parentology.com/best-apps-that-teach-kids-personal-finance/