Every parent wants their kids to grow up well rounded, competent, and confident. As someone who talks about money for a living there is a bit of added pressure that my kids are well rounded, competent, and confident with regards to handling money.
With that, my wife and I have been teaching our two oldest, Joshua and Alina, as many financial values as we can incorporate into their lives as possible.
It’s important to us that they learn how to spend, save, and give their money wisely because we have witnessed the stress and anxiety poor financial decisions can cause, and the success that good decisions can create.
The other day a friend asked my son how he saves his money. You can bet we were proud when he immediately responded “I split my money into four groups: spend, save, donate and invest.” Our work must be done, right? If only parenting were that easy. Teaching children about finances is a lifelong practice. The younger you start teaching your child about money and responsibility, the longer they will be able to practice good financial decisions.
Finances are a habit
According to Dr. Roy Salgado, who has practiced in children’s therapy for over 15 years, starting a good habit young, like financial responsibility, is important. “Anything we do over a period of time becomes habit, whether it is healthy or not, from eating habits to physical activity to financial planning.
If a parent denies a child information with regard to finances, they won’t have the opportunity to start a financial habit and will have to create this habit later in life.”
The golden age to learn something new, according to Dr. Roy, is the age of seven. But as soon as children are verbal they can start learning. When children begin to be verbal they are in a developmental stage and are able to tell the difference between “yes” or “no” and “can have” and “cannot have”.
How should you take advantage of this learning stage? Play games with your child that revolve around the idea that if they do not earn enough of something, like tokens, they won’t get a prize. Teach your child that they cannot have everything they want all the time, for example, they can’t have ice cream before dinner.
The golden age to learn
The best time to start creating a new habit is when a child turns seven-years-old. Dr. Roy states “Around the age of seven children move from the preoperational stage of thinking to the concrete stage of thinking.”
During the preoperational stage of thinking, children can’t understand concepts and tend to think magically, which is why it’s so easy for them to believe in Santa Claus. Once children turn seven, their mind enters the concrete stage of thinking and is able to understand more complex subjects and question why things are the way they are.
It’s during this time that you can start introducing more complex ideas about money, like saving towards a specific goal and the difference between a want and a need.
Good habits last a lifetime
Raising financially-literate children doesn’t have to be difficult, but it does take time. By starting early with simple concepts and gradually building your child’s knowledge of saving and spending money you are helping them create financial habits that will be with them throughout their entire life.
My 11-year-old son may be able to understand that he needs to split the money he earns into the four groups my wife and I taught him about, but we aren’t off the hook yet. We still have years ahead of teaching him good financial habits. It will be fun as a parent to watch his wants and needs change as he grows older — from Pokemon cards to nerf guns to his first car.
Regardless of what he decides to save and spend his money on, my wife and I will be there to support, guide and reinforce the importance of making wise decisions with money. Because money plays a constant role in our lives, instilling a good foundation of healthy financial habits in your children is a gift that will last a lifetime.
Start teaching your child about money today! Contact us for more information and other tips and tricks to share with your child.