In June, our eyes are on our children even more, having International Children’s Day ahead. From parent to guardian or teacher, we can all make a difference through education, for their future well-being. Clear, simple, and defining financial concepts can be transferred to them, from the youngest ages, further into adolescence or beyond. So, let me introduce you to the milestones of financial education for children by age stages.
Children under 4
Yes, you heard right, even for 2–3-year-old children. We won’t make them invest in the stock market, nor do they have a monthly budget, but clearly the first steps towards understanding money can be taken. Even if at this age it won’t be a full one.
There are variations of games with exceptional materials dedicated to their age. Remember to play for real and not just for nostalgia.
Familiarizing them with money, physically – with bills, and coins (although for their safety they are more hidden in the house – they are at risk of being swallowed and are not exactly hygienic) is not a bad idea, under careful supervision.
Children aged 4-7 (very important for imparting early financial education concepts!!)
Repeated psychology studies from the University of Cambridge have made it clear that healthy money habits are formed by the age of 7, and I have highlighted this on the blog before.
Therefore, this age is really important as we help our children form new habits. After the age of 7, we have to reprogram the habits they have picked up, which is harder. This is, it seems, the age to introduce pocket money into their responsibility, even if it is in small amounts. This is a great time for key financial concepts that they can carry with them throughout life.
Money as seeds that lead to fruit – is not only a metaphor but also a concept of the association tested by psychologists and specialists in parenting. The child loses those seeds (can spend) or can plant them (can save/invest). This teaches him that money is not just for spending. Their job is to make sure they plant some seeds (money) so they grow over time.
When they get money for a birthday or holiday, have them save it in a piggy bank or clear jar.
Help them set a goal. At these ages, the visual is still important. As they see the amount of money increase, they will get excited. Every time you add money, use it as an opportunity to count what they have saved. Children cannot have patience, so it is important that the goals are shorter-term.
Age 7 -13! Adolescence in financial infancy
In the age group also called transitional, children watch everything you do. They pay close attention to their parents’ spending habits. What your children see you do is much more powerful than what they hear you say, as they are in a period of building habits and values.
Teaching them at this age, the difference between wishes and needs can help build daily habits. These will shape how they earn, save, and buy as adults. Weighing decisions and consequences, such as “if you buy this, you won’t have enough money for that,” helps teach budgeting and saving skills that set them up for a successful financial future.
Making money and ways to do it. Teach your children that by working, they can earn their own money. You can create a list of activities within the family through which they can earn additional money (gardening, washing the car, etc.); remember, this should not be for general daily chores (making beds, washing dishes, arranging books, or doing homework, etc.).
They need to understand that they will earn money when they bring value to others.
Instead of associating hard work with money, try introducing the concept of entrepreneurship. You never know, your kids might have an entrepreneurial flair that needs to be tapped, whether it’s something they cook at home or paintings they make. The lemonade stand might be a good idea.
Over 13 years old
Ideally, by this age, your children will have formed a good habit of saving and have thought of different ways to earn money. Now is the time for them to be aware of various money-related topics and take more financial responsibility. Also teach them about debt, taxes, gambling (how to avoid them and how dangerous they can be), and scams to avoid.
Give them the ability to have a bank account/debit card. It’s a great way for them to appreciate how to manage money themselves, even though they will need your approval, attention, and supervision.
This is the right time to let them make mistakes with money and, with your help, learn from those mistakes. If they waste their money, it will help them more than you might think to not make similar mistakes in the future.