When best to ‘talk money’ with your kids

It is best that kids learn about money while they are young. So, when exactly is the earliest time to teach them?

A study on habit-forming by Dr David Whitbread and Dr Sue Bingham at the University of Cambridge revealed that children develop basic concepts that relate to financial behaviours by age seven.

While children may start counting as early as two or three years old, they often haven’t mastered the concept of equivalence until about age five.

According to research by the Centre For Financial Security, “It has been shown that children make great strides in economic understanding between the ages of six and 12, such that children’s understanding is ‘essentially adult’ around age 12.”

So here’s the short answer: The most optimal age to teach kids about money is age seven. This is because children at this age already possess the required understanding of basic financial matters.

However, this does not mean you can’t start earlier. Below are a few tips to start teaching kids about money at specific ages and comprehension levels:

Pre-schoolers and kindergarteners

• Have a clear piggy bank

Children at this age can perceive changes visually. As you teach them to put money inside a clear jar or piggy bank every day, they will comprehend that the objects (i.e. money) inside the jar is increasing over time. This exercise clearly sets the foundation for saving. This may be the seed in which your children can grow financially.

• Show that things cost money

This will teach your children that most things in life are not free. Next time you’re in the grocery store and you see your child reaching for that chocolate bar by the counter, hand him or her some money to give to the cashier.

This will teach them that an “exchange” has to be made so they can enjoy the chocolate. This teaches them the value of money and its importance in acquiring things.

Primary school students (most optimal age)

• Teach them how to budget

Children at this age understand the concept of boundaries. As they follow your instructions to not play in that dangerous area by the park, they grasp the limitations you set for them. Your instructions will keep them safe.

Explain that these boundaries are for their own good. The same can be applied to money. Having boundaries in spending will keep them financially healthy.

• Highlight the importance of giving

Teach your child that money isn’t everything. And that there are so many people out there who could benefit from their giving.

Explain to them the trap that greed sets for their lives and how giving is a practical and proactive way to curb it.

Find something your children really care about in society and teach them to set aside a portion of their allowance to support their causes.

Teenagers

• Guide them in making their own money

At this age, your children have much time on their hands as they frequently take breaks from school. Help them think of ways to make their free time profitable.

They can create their own initiatives like holding a garage sale, manning a lemonade stand, a small bakeshop or an online clothes store.

They can also start taking odd jobs by washing neighbours’ cars or working part-time at a store. Whatever it is they do, the significance of this work is that they have cash coming in directly from their free time.

• Introduce investing

Explain the concept of compounded interest – that their money can grow exponentially across time. Show them that their money can profit passively. You can even help them start a portfolio of investments.

Together with your children, research about stocks, bonds, equities, currencies and businesses, and teach them to start setting aside their income for investing.

Their best advantage is their youth. They have much time on their side to see their incomes profit beneficially.

The bottom line: As, your child’s parent, you know what is best for them financially. You yourself can determine what needs to be taught and when it can be taught.

Getting ready for the money talk

1. Prepare

Prepare yourself mentally and emotionally. Parents are the first, and at this point, the best teachers to their kids. You know your children. You know what works best for them.

Take stock of your child’s learning behaviours and correlate them to your own financial habits. Think of creative ways on how to impart this to your children.

Talk to your spouse about your thoughts and approaches. Agree with each other on what is best for your children. Work as a team and be proactive in teaching your kids about money.

2. Discern

The best way for children to learn is through experience. You and your kids go through multiple events in a day. Whether it’s at the school’s parking lot, the grocery store, or your backyard, be ready to discern an opportune time to demonstrate simple money lessons. Be creative with your approach. Your children will frequently make mistakes so be patient with them. Use every mistake as an opportunity for them to learn.

3. Teach

Every lesson you give your children is a deposit for their future. Be joyful and expressive in your teaching. Since children learn from their parents best, they imitate who you are and what you do.

So if your approach toward money is negative, they will imitate this. But if your approach to money is one of respect and freedom, they will imitate that.

This article first appeared in thenewsavvy.com

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