Age-by-age guide on teaching your child about money
Learning about money can bring an abundance of value to kids that don’t necessarily have to do with money itself. First of all, it can increase their desire to learn math. They’ll see how the math skills they’re learning in school (perhaps reluctantly) is needed to help them in their daily lives. Many studies show that when children understand the ‘why’ behind learning a subject, their retention and interest increases dramatically.
Second, kids learn how to set goals through learning about money. Goal setting applies to all areas of life, so the money lessons, while tremendously valuable, are also giving them a process that they can start using for other things, such as academic goals, fitness goals and other important areas.
Also, learning about money increases their awareness and appreciation for the value money has in daily life – for their family and for themselves. Additionally, critical thinking skills are developed through learning about money as they explore needs vs. wants and weigh different options for spending money. Critical thinking is a skill that will serve them well throughout their entire life! This might even be the most important!
The decision to expose your child to financial skills at an early age has long lasting benefits. Studies have shown that kids who started saving at a young age were more likely to have diverse asset portfolios and greater wealth than those who didn’t.
Ages 3-4: Reward Systems: Teaching children about doing work and receiving an immediate reward can be easily taught at this young age. Giving kids small tasks that they can accomplish around the house will give them motivation to help, will build their self esteem and they can instantly see the fruits of their labor in their piggy bank or tiny coin purse or wallet. A great suggestion is to create an imaginary store in the house where they can pretend to shop and learn how to exchange money and interact with a sales clerk.
Ages 5-7: Counting Money & Earning an Allowance: Start with a small weekly allowance at this stage. Kids can start setting goals for themselves once they have a regular amount of money they’re earning. Perhaps they are wanting a particular game or toy. This could be a good time to have them set aside a portion of their income to put toward something they really want. This will also naturally lead to the skill of counting money and understanding the value of all our currency.
Ages 8-10: Saving Money and Smart Spending: This is a good age for a child to get exposure to a bank and to actually open their own savings account. Take them with you to the bank! They also are probably tech savvy enough to learn about the bank App that allows them to see their savings account online.
Ages 11-14: Smart Spending and Investing: This is a great time for kids to start making some money outside of the home and to start being responsible for buying or contributing to some of the higher-priced games or clothes. Whether it’s baby-sitting, shoveling snow for the elderly neighbors or maybe even coming up with an idea for a business, tweens are ready to handle more responsibilities and can practice more sophisticated financial skills and decision-making. Now is ideal for them to start learning about the stock market or even planning a fund for college!
From tots to teenagers kids can practice financial skills and decision-making in many fun ways. As they manage their first paychecks and the spending and saving choices that go along with them, there are endless ways to give them hands on experiences at any age. The key is to keep them challenged and to guide them toward setting goals for their money. They will learn that their goals will keep changing and they will need to reassess their financial goals and skills along the way…into adulthood.