In a 2013 survey, the Money Advice Service, an independent organization that provides free, unbiased money advice, found that adults’ financial habits typically are set by the age of seven-years-old!1 Therefore, it’s important to start teaching children about money at a young age.
Part I of this blog will cover five ideas to help you coach younger children on the basics of money management, while Part II will cover tips for older children and parents.
So let’s get started:
1. Set a good example
It’s cliché, but actions speak louder than words. When commenting on the study mentioned above, Caroline Rookes, CEO of the Money Advice Service, said, “This study really demonstrates the power of parental influences, and illustrates how much of what you learn and absorb when you are young, both consciously and subconsciously, affects the choices you make throughout the rest of your life.”2
Start by showing your children that you put money toward your savings and investments every month. As they get older, you can introduce more advanced concepts, such as the importance of having a “rainy-day fund” (also known as an emergency fund) and long-term planning for future goals, such as saving for their college education and for their eventual retirement.
When you take your children shopping, talk to them about how much you can afford to spend, why it helps to buy items on sale or use coupons, and the ins and outs of using credit or debit cards, among other topics.
2. Play games that can teach your children about money
Monopoly is probably the first game that comes to mind, but others include:
3. Download educational apps to your smartphone or tablet
There are several great money-management apps for kids, but here are a few standouts:
PiggyBot: In a recent interview for U.S. News & World Report, Christine Elgersma, Senior Editor of Apps and Digital Learning at Common Sense Media, a nonprofit that helps parents, kids and educators navigate media and technology, said PiggyBot “gives children a direct role in managing their allowances and helps them visualize how much money mom and dad give them.”3
Cost: Free (available on iOS devices)
Recommended Ages: 6-8
Kids Money: This is a simple budgeting app that allows kids to set their own savings goals (for example, “bike”, “iPad”, “laptop”, etc.).
Cost: Free (available on iOS devices)
Recommended Ages: 5+
Savings Spree: Presented in a “game show” format, Savings Spree introduces kids to the concept of earning money for the work that’s available; it also demonstrates how they can save their money, spend wisely, donate to others or invest so it will grow and help them reach future goals.
Cost: $5.99 (available on iOS devices)
Recommended Ages: 7+
4. Read books about money to your children
Below, we’ve included a short list of book recommendations for different age groups.
For younger kids, consider weaving basic financial concepts into bedtime reading, using characters they already know and like as examples (for instance, the Berenstain Bears):
— “The Berenstain Bears Lend a Helping Hand”
— “The Berenstain Bears’ Dollars and Sense”
— “The Berenstain Bears Think of Those in Need”
— “The Berenstain Bears’ Trouble with Money”
— “Alexander, Who Used to Be Rich Last Sunday”
Author: Dr. Seuss (Bonnie Worth)
— “One Cent, Two Cents, Old Cent, New Cent: All About Money”
— “Money Matters for Kids”
— “Barron’s Money Sense for Kids!”
— “The Young Investor: Projects and Activities for Making Your Money Grow”
— “Growing Money: A Complete Investing Guide for Kids”
— “The Everything Kids’ Money Book”
— “Money Matters for Kids” or “Money Matters for Teens” (depending on your child’s age level)
5. Introduce the concept of “save, spend and give”
As children start to earn an allowance, babysitting money and/or receive money as gifts, you may encourage them to put a portion of the funds into savings, give a percentage to the less fortunate or a charity they care about, and spend the rest. Check out resources like Pinterest for ideas to help make the process fun, such as crafting jars for each category to help your kids store their money.
In addition to giving money to a good cause, encourage your children to donate their time by volunteering with a charity. This helps instill the lesson that some people in the world are less fortunate than others.
Dr. David Whitebread, co-author of the Money Advice Service study and Senior Lecturer at Cambridge University, summed it up well by saying:
“In today’s world, there are many pressures on young children and their families which make financial education increasingly important. The ‘habits of mind’ that influence the ways children approach complex problems and decisions, including financial ones, are largely determined in the first few years of life. Simply imparting information is now recognized as being ineffective in this area. By contrast, early experiences provided by parents, caregivers and teachers which support children in learning how to plan ahead, in being reflective in their thinking and in being able to regulate their emotions can make a huge difference in promoting beneficial financial behavior.”4
Start teaching your children about money early on, demonstrate good financial habits, communicate about money often and consider using some of the ideas we discussed above to help make it fun!
There are more money tips on the way! Check out Part II of our "Smart Kids, Smart Money" series, where we share strategies for coaching teenagers in the basics of sound money management