The Perfect Time To Teach Your Kids About Money Is Earlier Than You Think

Whether we like it or not, money decisions permeate just about every aspect of our adult lives. Everything from going to the grocery store to filling up the gas tank to what college we choose involves money decisions. Even if money is far from what is most important to you, it’s impossible to get away from dealing with it. For that reason, it’s important to master your finances and make your money work for you. It’s crucial to pass these skills on to our children so they can become successful, independent and happy adults. There are a plethora of resources on how to teach kids about money and financial literacy, but when should we start teaching them? It’s never too late to start, but there is an optimal time to add a little financial literacy to their life lessons. As you teach your kids to get along with others, to count, and to read, sprinkle in a few money lessons to help them to get started on a positive track. According to research by the Center For Financial Security, “It has been shown that children make great strides in economic understanding between the ages of 6 and 12, such that children’s understanding is ‘essentially adult’ around age 12.” The following list lays out when children understand different financial concepts: Counting Studies on habit forming in children by Dr. David Whitebread and Dr. Sue Bingham at the University of Cambridge report that by age 7, children have developed many of the basic concepts that relate to financial behaviors. Children may start to understand counting as early as 2 to 3 years old, but they often haven’t mastered the concept of “equals” until about age 5. Conservation Typically, the researchers explain, by age 7, children understand the concept of conservation, which essentially means that the value of money is not measured by coin size. In other words, a dime is worth more than a nickel even though the latter is larger. Until they get this point, they may want five pennies instead of a dime since the size of the coin as well as the quantity is more. Exchange and Equivalence The other concept children start to grasp after age 6 is “exchange and equivalence” — that money has different denominations, and that there isn’t always enough to pay for certain items. The old cliche makes sense here:  Some of your children’s first money lessons could address this concept of having to give up their money to get their item as well as how much things cost.  One idea would be doing a “dollar day” and seeing what they can get when they spend that dollar.  I guess the Dollar Store would be perfect for this!  Children can then practice parting with their dollar for their item and maybe even receive some change in return. Whatever you do, make it real. When your money teaching points are real life practical experiences that children can relate to instead of abstract concepts, the lesson may just stick. , but you might as well start their money education at the optimal time. For more information about teaching your kids about finances, check out these resources: • Money As You Grow • MyMoney.gov • The Mint • National Financial Educators Council • Jump Start