Simone Biles is an American gymnast famous for leading the “Final Five” to gold in the 2016 Olympics. She owns four Olympic gold medals and was All-Around World Champion four years straight from age 16-19. Her early success is even more impressive given her training began at age six, late for an Olympic gymnast. Most of her peers began training between two and five years old! Sure, they weren’t delivering full balance beam routines at 24 months, but they were practicing basic concepts. I believe becoming an Olympic gymnast and becoming financially independent have something in common: it helps to train early and often.
An important disclosure: I do not yet have children of my own. However, I do have an internet connection that led me to some fantastic resources I’ve blended here. The first is a well-researched paper by two PhD cognitive psychologists. The second is a TED Talk by a father who advocates for financial education. These ideas resonated with me, but at the end of the day, your children are your own.
From Birth: Children learn by modeling behaviors. If you’ve ever let a colorful word slip and heard it repeated by your toddler, you know it’s true! Being a positive role model can extend to personal finance. If you demonstrate responsible saving, spending, and giving throughout their childhood, your kids will pick up on it. Monkey see, monkey do.
Ages 4-5: Preschoolers learn the foundational skill of money management – counting. Just as reading every day is predictive of adult literacy, including counting and comparison games is predictive of mathematical aptitude. Count and play simple numbers games with a preschooler.
Ages 6-8: Primary students are learning to count into the hundreds and begin to be able to grasp more abstract concepts like odd and even numbers. This is a good time to teach exchange and equivalence, aka shopping. A great way to teach your child that money is scarce is to let them spend some. Let them choose how to spend $5 so they can see that there’s a limit to what each sum can buy and that when you spend on one item you necessarily forgo another.
Ages 7-10: Early adolescents are most ripe for financial learning, because they have rapidly improving mathematical and cognitive tools. They’re becoming able to appreciate the cause-and-effect relationship of earning income for work. Reward them for chores or behavior with tangible money and let them spend it to their pleasure or disappointment. They also are developing their executive functions like self-control. Now is a great time to have a child save up for a purchase. Considering that the ability to delay gratification is more correlated to career success than IQ or SAT scores, this could be the best lesson to teach a nine-year-old. A visual chart can be helpful to show progress.
Ages 10-15: Late adolescents and early teens can grasp all the basic concepts of spending, saving and giving. Now they need practice. Let them have their own economic experiences. Working small jobs like babysitting and lawnmowing, overseeing a bank account, and investing are appropriate. Trial-and-error is key. Letting the hormones drive a senseless $100 purchase at 15 might prevent an $100,000 error at 25. Adam Carroll in the TED talk above took out $10,000 and played Monopoly with real cash, finding that his kids were much more risk averse when the money became real.
Ages 16+: Now that they’re driving age, late teenagers are on their way to becoming adults. Discuss adult topics like connecting career with earnings and lifestyle. College is looming and represents a much larger financial commitment, and potential blunder, for today’s teens than prior generations. It’s also a great time to introduce concepts like debt and the freedom afforded to those who use money properly. Today’s teens may never need to touch physical cash, but they should understand how credit cards and digital payments affect our spending habits. Many adults are still working on mastering this concept!
To this day, I like to guess the grand total of my grocery trip while the items are being scanned, a game my family played growing up. I’m thankful to have had good money role models and am mindful of the penalty paid by peers that did not. If you grew up without this benefit, you know the pain that comes with learning the hard way. It’s never too late to benefit from good habits, but it sure helps to have a head start. Hopefully these strategies can be a source of fun and learning for your family.
- The Money Advice Service. “Habit Formation and Learning in Young Children.” By Dr. David Whitebread and Dr. Sue Bingham. May 2013.
- TEDx Talks. “When money isn’t real: the $10,000 experiment.” Youtube. https://www.youtube.com/watch?v=_VB39Jo8mAQ