Okay, so you can’t talk stocks with your 3-year-old, but don’t underestimate your child’s financial savvy.
According to research out of Cambridge University, kids can start learning financial concepts by age 3 and develop financial habits by 7. This may seem incredibly young, but kids are like sponges and they pick things up fast!
So, if you are contemplating when to start talking to your kids about money, the right time is probably now.
When to Start Talking to Your Kids About Money
It’s almost never too early to start talking to your kids about money and instilling good financial habits. However, this doesn’t mean you should share all of your financial worries and stressors with your second-grader. It’s important to introduce money concepts in a fun and age-appropriate way.
Whether it’s reading children’s books about money, playing fun games that include a financial element, or even having simple conversations about money, there are many approaches you can take. The important thing to remember is that children learn financial skills primarily from their families. So, try to normalize money conversations in your home and talk about your finances openly and honestly, while being age-appropriate.
If you don’t feel confident teaching your kids about money, don’t worry. It’s not up to you to have all of the answers. You can still improve and support their financial literacy by acting as their financial guide. When you don’t know the answer to one of your kids’ questions, point them in the direction of a useful book or other financial resources.
How to Teach Kids About Money at Different Ages
The benefits of talking to your kids about money and introducing financial topics early on can’t be overstated. Here are some of my favorite ways to teach kids about money, no matter how old they are.
For parents of toddlers, consider introducing a piggy bank. You can teach your young child how to recognize the different types of coins as they use their fine motor skills to place the nickels, dimes, and quarters into the coin slot. They can also practice counting as they put each coin into their piggy bank.
Make money fun by playing store with your children. Have them work as the shop owner and go and buy different items from their store. This will teach your preschooler about the exchange of goods and money. Tell them you’d like to purchase one of their toys and ask them how much it will cost. You can use play money to demonstrate the exchange of the toy for cash. This also gives them the opportunity to learn about financial concepts like buying, selling, value, cost, and price.
You can continue to play games with your kindergartner. This time, play a game of bank. Have your child pretend to work as a bank teller. You can come to the bank with your debit card and deposit or take out money. Then switch roles — you play bank teller and have your child come to the bank for a new financial experience. This provides the opportunity to discuss the concept of saving, banking, and debit.
Take your elementary-aged child to the store with you for a fun financial experience. Talk to them about what you are going to buy and how much it costs. Show them your shopping list and stick to it. Tell them why they can’t have every candy bar or toy that they see. This experience can reinforce the concept that things cost money. It can also give you the chance to discuss needs and wants — you don’t need a chocolate bar, you just want one. Delayed gratification is another great lesson that can be learned. Tell them they can have the toy they want but will need to save up their pocket money to buy it.
When you are ready to check out, encourage your child to watch as the cashier rings up your items. Then, let them help you pay. They can help you to count your cash, or you can let them use your credit card. This gives you a great opportunity to introduce the concept of credit. When you’re finished, show them the receipt so they can see how much everything costs. Overall, a trip to the grocery store can be an amazing financial lesson for kids.
Make money fun with a family game night. Pull out Monopoly or the Game of Life and enjoy time together while you also share important money lessons. Board games can be a great way for your middle school-aged child to discuss the concepts of rent, bills, budgeting, and even bankruptcy.
When it comes to teaching older kids about money, don’t hold back. You don’t want to scare your high schooler but you definitely want to prepare them for the real world. Make it your mission to have them financially literate before they graduate high school. Before they leave your house, you want them to understand how to responsibly use a credit card and the importance of having a good credit score.
Talk to your teen about student loans and even show them the staggering student debt statistics. Introduce them to the concept of investing and the magic of compound interest. Again, if you don’t fully understand some of these concepts yourself, then use this as an opportunity to learn together. Find a new financial podcast and listen to it in the car with your teen or share your favorite financial blogging sites with each other.
What to Avoid When Teaching Kids About Money
Now that we’ve covered some of the productive ways you can teach your kids of all ages about money, what are some things you should avoid? While it’s a good idea to be open, honest, and age-appropriate, it’s probably best to steer clear of the following:
- Avoid heated money conversations – Try not to argue or fight about money in front of your children. It’s okay to have money conversations and even discuss your financial mistakes, as this is a great way to help them learn. But, fighting about money is a no-go because this can form a negative association between arguments and money.
- Don’t model financially irresponsible behavior – Young children learn through modeling. Monkey see monkey do. So, if mom and dad are always buying things they can’t afford and racking up the credit card, don’t be surprised if their little one grows up to make some of the same financial mistakes. Do your best to model responsible financial behavior, and if you make a mistake, talk about it.
- Don’t make the topic of money taboo – Many people are uncomfortable talking about money. This may be because their parents didn’t talk about money or said it was rude to talk about money. But, it’s time to break the cycle. If you want to raise money-savvy kids then you need to create an environment in which they feel comfortable asking questions and having financial conversations.
- Don’t give them everything – If your child sees you as a bank that is open 24/7 and always full of money, then they won’t learn to equate money with effort or work. Teach your kids that money doesn’t grow on trees. Make them work for it. Set up age-appropriate chores and have them earn the value of a dollar.
There’s No Time Like Now to Teach Your Kids About Money
No one expects you to have all the answers about money topics, so don’t let that scare you. Just go for it! If you want to raise financially savvy kids, the most important part is to start early and to talk often.
— By Jessica Martel