21st January 2016 at 4:46pm
Developing children’s understanding of money from an early age prepares them for the financial challenges of adulthood.
Getting them to understand the basics of how to budget, spend and save isn’t just critical for their personal development, it’s an almost sure-fire way of establishing good money habits for life.
Sounds good doesn’t it? The tricky part is… how? As many parents and grandparents know to their cost, it can be difficult to deal with children’s lack of understanding about the value of money as well as their never-ending pester power.
After all, they simply “must” have that new Lego set their friends have! The fact that it costs the same as your average weekly grocery bill and might be played with just a handful of times doesn’t cross their minds.
Start them young
Where do you start, and when? With a report by the University of Cambridge for the Money Advice Service showing that children’s money habits are formed by the time they’re 7, starting early – and from as young as 3 years-old if possible – is the key to helping them become financially savvy.
Admittedly, there’s no quick fix and it takes time, patience and, sometimes, nerves of steel, but it can be done. Leaving it until they’re in their teens is just too late and needs a completely different approach.
Talk about money
Make conversations about money part of everyday life, for example when getting money out at the ATM or simply buying groceries at the supermarket.
As CNN.com says: “The best way to encourage sound spending habits is to exhibit them. When planning a trip to the grocery or discount store, get your children involved in making a judicious list and sticking to it. This will teach them to avoid the bane of all savers: impulse buying.”
Develop their good habits
Teach them to make good choices, earn their pocket money, budget and start saving up for things: the lesson being that they may have to learn to wait to buy something they really want, but it’ll be worth it. Delaying gratification can be a very positive habit, much as it doesn’t come naturally to many 7-year olds.
Learn value from grandparents
Of course, it’s not all down to parents (or teachers for that matter). A quarter of children interviewed in a recent survey by online retailer Ziffit credited their grandparents with teaching them about the value of money.
A new approach for the digital age?
Finally, it’s worth considering whether we need a new approach to teaching children good money habits in the digital age? Bruce Davis, a financial entrepreneur who helped create peer-to-peer lending, believes so:
“Since we grew up it’s gone from being solid to being digital. Our children won’t use cash. All of the ways we teach saving are kind of irrelevant. We shouldn’t be teaching them how to add up with coins at all. We need to be able to teach them how to use a receipt. We have a nostalgic view of money that we teach our children, and then we throw them into the world of finance and they get lost.” (Source: The Guardian)
It’s certainly true that in a world where cash is fast disappearing and we pay for nearly everything digitally, it’s smartphone and tablet apps, even for the very young, which are playing an increasingly-important and useful role in helping children manage their money well. (And their parents and grandparents too, of course.)
But having new technology to help is only part of the answer. Children still need to understand the value of money and go on to develop the skills they need to manage it long before they reach adulthood.
It goes without saying that they could still learn a thing or two from talking with Gran and Papa.
Join the conversation
The information or any response to comments should not be regarded as financial advice and is based on our understanding in January 2016.