Kids and Money: Many Financial Habits are Set by Age 7
by A. Scott White, CFP®, ChFC®, CLU®
President, Scott White Advisors
Research shows that kids’ financial habits may be set by age 7—which means that teaching them financial skills should start early. According to behavior experts David Whitebread and Sue Bingham of the University of Cambridge, financial habits are typically formed early in childhood. And it’s very hard to reverse those habits later in life.1
Teaching your children good financial habits is one of the most important things adults can do, but most parents aren’t doing it early enough. In fact, the T. Rowe Price Parents, Kids & Money survey showed that most parents waited until their children were about 15 years old to begin teaching them financial basics.2 Experts say we need to start teaching good money habits as soon as kids understand that money is used to buy things. Here are some ways to get started.
- Read financial literacy books to kids. Here are Investopedia’s top recommendations:3
How the Moonjar was Made by Eulalie Scandiuzzi teaches kids about saving, spending and sharing to build their dreams. Lemonade in Winter: A Book About Two Kids Counting Money by Emily Jenkins teaches kids about entrepreneurship, commerce and math basics. A Chair for My Mother by Vera B. Williams teaches kids about budgeting and planning for the unexpected.
- Make learning fun with games and apps. Games can help develop a child’s understanding of valuable financial strategies and concepts and teach kids the basics of investing, earning, spending and cash flow. Four of the top-rated board games on Amazon include Cash Flow for Kids, The Allowance Game, Money Bags – A Crazy Coin Counting Game, and Exact Change.US News & World Report encourages parents to consider downloading apps that will teach kids valuable money skills.4 Apps for younger children with high ratings on iTunes include Piggy Bot, which allows kids to earn a virtual allowance and practice saving, spending and sharing; FamZoo Family Finance, which gets the entire family working together to manage money, understand a budget and save; and Bankaroo, which teaches kids basic money tracking and checkbook-balancing skills.
- Open a savings account. Developing a savings plan early is a great step toward future financial goals. Savings accounts can teach kids about money, including how to set financial goals and budget for those goals. Many banks offer savings accounts for kids to help them learn the value of saving. Teaching kids about delayed gratification when it comes to money can help them guard against unnecessary spending and learn to value establishing control of their money.
Early financial literacy teaches children how to have a good, lifelong relationship with money. When they learn financial literacy at an early age, and know proper money management skills, kids tend to keep them and use them throughout their lives. Money management is a critical life skill that will help them set the stage for their financial future and avoid various money mistakes later in life.
April is Financial Literacy Month, so what better time to start teaching your children and grandchildren how to manage money?