Is it too early to start teaching your kids about the value of money? Can they really absorb your advice and guidance at age six, seven, or even younger?
A recent study found that kids form attitudes and habits about money as early as age five, and those attitudes come from their observations. Rather than leaving their money habits up to chance, take matters into your own hands by providing age-appropriate money lessons for your kids.
So, how can you teach kids about money? What types of lessons and examples should you provide at different ages? We’re here to help.
Read on to learn about the money concepts you can teach your kids based on their age.
Introducing Money Concepts at Age 3-4
Once your tot is learning how to count, it’s a good time to start introducing the concept of money. Working with a small denomination, like coins, can strengthen their early number skills while also building the idea that money has a set value.
Why work with tactile money like coins or bills? Nowadays, children are more accustomed than ever before to watching adults use credit cards and even smartphones to pay for goods and services. This can make it particularly difficult to grasp the concept that money is both real and limited, whereas coins and bills make these concepts a little more tangible.
Discussing the Cost of Goods at Age 5-6
Around age five, most children have a basic understanding that the goods they want (ie toys or candy at the corner store) cost money. However, they see their parents making purchases on a regular basis, and may start to wonder why you won’t buy them something small when you’re often buying things like groceries, clothing, and school supplies.
Now is a good time to start talking about how much things cost and roleplaying the act of selecting items and purchasing them based on how much money you have in hand. This is also a good time to introduce a small allowance so that your child experiences firsthand the process of saving money to buy a desired good or even “wasting” money on an item that isn’t all that it’s cracked up to be.
Explaining Wants, Needs, and Smart Spending at Age 7-8
By age 7 and 8, children are ready to learn the difference between wants and needs and to conceptualize that there is a future beyond tomorrow. By now, parents have likely experienced the meltdown that can arise when their child asks for something and is told “no.” While they might not have understood the reasoning behind the “no” at an earlier age, it might start to click now.
Use school supply shopping as an example. You need to buy the supplies on the list sent home by your child’s teacher and you may need to buy a new backpack or lunchbox. Your child might want the fun pack of erasers or the biggest pack of crayons, but since those things aren’t on the list, they don’t need them, and the school supply budget must cover what they need.
Now, what if some of your school supply items are on sale? Well, those extra savings may create a little wiggle room for one desired item, like the fun pack of erasers. This is an early taste of smart spending.
Practicing Saving and Resisting Impulsive Shopping at Age 9-10
If your child receives an allowance, age 9-10 is the time to teach them about setting money aside, rather than spending it right away. We also recommend encouraging them to give a percentage of their monthly allowance to a charity of their choice, teaching them about the value of making small personal sacrifices to help others.
At first, your kids may feel frustrated that saving and donating money gives them less to spend. However, with your help, this is also an opportunity to teach them about the downsides of impulsive shopping. While that instant gratification can feel good in the moment, it can also lead to financial waste and regret, whereas the need to wait before purchasing something gives you time to decide whether or not you really want it.
Understanding Marketing Tactics and Creating a Budget at Age 11-12
By age 11 and 12, your kids are going to spend more time online. These days, social media is rife with advertisements for appealing-looking products that often aren’t what they seem. Help your kids to navigate deceptive marketing tactics by showing them how to look for consumer reviews and showing them examples of products that are lower in quality or function than what advertisements suggested.
These preteen years are also suitable for talking about budgeting. When you’re grocery shopping or planning a party, include your preteen in the process of setting a budget and making a plan to stay within that budget. This will come in handy when they start to feel the pressure of buying higher-priced items with their own money, like technology or designer clothing.
Valuing Money Earned at Age 13-14
You may have created a system whereby your child earns allowance in exchange for certain chores. However, you can now start to introduce more complicated or time-consuming tasks, like mowing, raking, or babysitting in exchange for more money. When your young teen works hard for their money, they’ll start to think differently about spending it.
Talk to them about the options at their disposal when they earn this age-appropriate income. You can introduce them to investment apps for teens and explain the potential and pitfalls of investing. You can also reinforce earlier lessons, like delayed gratification and budgeting.
Now that they have this extra income, you can also consider setting up a checking account for them. Teach them how to use and monitor a debit card and talk about the repercussions of over drafting. This is a safe way to help them transition from cash to plastic.
Revealing the Truth About Debt at Age 15-16
Discussing debt with your teenager before they’re making adult financial decisions is key. There will come a time when everyone opens up a line of credit or takes out a loan to cover major expenses. To young and inexperienced minds, this type of debt can seem inconsequential, when the truth is much more complicated.
If your teen has become familiar with money by this age, they won’t struggle to understand monthly payments and interest rates. Talk to them about what happens when you take on more debt than you can handle or loans with high interest rates. You can also talk about when it’s appropriate to take on debt and when it isn’t.
Use examples from your own life that they’ll recognize. Did you take out a loan to buy your house or car? Did you take out loans to go to college or put a well-budgeted vacation on a credit card?
The goal is to instill foresight and wisdom in your teens before they need to take on debt. That way, they don’t learn the hard way that some debt is life-altering for the worse.
Planning for College Expenses at Age 17-18
Canadian universities may be more affordable than other countries, but they still cost an average of about $30,000 CAD. Because you’ve had the foresight to teach your kids about money for years, you can have a calm and rational conversation about the cost of school, rather than an emotionally charged one.
Even if you’ve saved up to pay for your child’s college education, it’s still important to discuss. Will financial considerations limit which schools they can attend? Will they need to take out any loans to cover the difference in order to go to more expensive schools?
One way to put college loans into perspective is to calculate how long it would take to pay them off. It’s not always easy for a teenager to conceptualize large sums of money. By discussing it in terms of future salary and payments, you can help them weigh their options and make a smart financial choice for their future.
Teach Kids About Money to Help Them Form Good Spending Habits
Even if your child is as young as three years old, it’s not too soon to start learning about money. Use this guide to teach kids about money by using age-appropriate lessons and examples. Doing so will set them up for future success and prevent them from learning financial lessons the hard way.
Is it time for you and your family to take out a loan? Are you having a hard time securing a loan that will meet your needs without the high interest rates? Let us help you find the right loan for your financial needs.