Children start to understand money by age three and begin to develop lifelong financial habits at around age seven. So just as we’re teaching them to read and write and be kind, they’re likely ready to learn about finances too. And it may be one of their most important life lessons. Here are a few tips on how and when to encourage financial awareness in kids.
1. Start Young
Children as young as 3 years old can have fun playing simple games such as tracing the outline of coins and coloring them, pairing up similar coins or guessing the name of the coin. Of course, you, or another adult, should be there as they play.
2. Make Finances a Family Affair
When it comes to adult discussions about money, kids can be supportive and helpful. For example, if you're planning to go on a vacation, ask the kids where they'd like to go. They’ll see how the choice and length of vacations are driven by budget. And they’ll understand the kind of money-related decisions their parents make.
3. Create a Savings Plan for Something They Want
A 7-year-old child can handle an allowance. Encourage them to use it to make a purchase instead of you. If they want something more than their funds permit, explain why that’s not possible.If your child is desperate for a costlier video game or a gadget, agree on a long-term saving goal and start a fund in a clear jar labeled ‘Savings’. Children can contribute from their allowance and you can choose to chip in, too.
4. Make it a Game
Good old board games such as Monopoly and Life can highlight the basics of savings, earnings, ownership of items and losses. Online games, such as Fat Cat and Money & Stuff, can be engaging and fun for younger kids.
5. Keep Conversations Age Appropriate
Adults should be forthcoming about money, but without oversharing. Burdening a young child with details of a mortgage may be a little too much. Keep it age appropriate. And even if you and your spouse feel differently about money matters, when it comes to discussions with the kids, it may be better to present a united front.
Sure, you can keep telling your kids that “money doesn’t grow on trees.” But to make it real for them, try to make finances part of your family interactions. A solid grounding in the basics early on can help ensure that they grow up to be financially healthy and responsible adults.