Most parents wait until their kids are teenagers before discussing money with them, according to T. Rowe Price's 10th Annual Parents, Kids & Money Survey. That's a mistake, says Nikhol Bentley, a math teacher at Gilbert Stuart Middle School in Providence, Rhode Island.
"People tend to sell kids short," says Bentley. "They are extremely smart, and letting them be part of the financial conversations at home is a good way to make sure that they're able to make smarter financial choices when they're older."
Teaching your child concepts like spending, saving, and earning can help them establish good financial habits that can last them the rest of their lives. And there are age-appropriate ways to get started early on.
The National Education Association (NEA) provides lesson plans for teaching financial literacy to children as young as 4, and there are ways to lay the groundwork with even younger kids.
Around age 2, your child may be able to sound out different numbers, recognize numerals, or count out a sequence of numbers that they've heard over and over again. By age 4, most children are counting up to 10 or even beyond, according to LeapFrog, which helps parents use technology as a learning tool.
Counting is the first step in building and strengthening math skills in the classroom. It's basic but absolutely necessary.
Parents can help reinforce this skill by encouraging their child count everyday items like crayons or the number of apples or bananas you pick up at the grocery store.
Children can loosely understand the concept of income early on, says Bentley: As soon as they start school, or even before, they can grasp how currency works. Though they're not actually exchanging goods for money, they can show they understand value by trading Pokemon cards with each other, for example.
"They learn to share, trade cards or toys for things that they want, or some teachers will have some sort of ticket system that reinforces this concept of saving up your tickets for rewards or what it means to not have enough," says Bentley.
By age 6, kids generally understand that some bills or coins are smaller than others, and more money is needed to afford something more valuable. "Any type of reward system helps emphasize this idea of currency, and kids will pick up on the fact that there are certain things they need to do or behaviors they need to manage in order to earn that extra 'income,'" explains Bentley.
The goal isn't to teach them not to spend but to show them how to spend wisely so they end up feeling satisfied.
"Give them the opportunity to make choices about how to best spend their money," suggests Marguerita Cheng, chief executive officer at Blue Ocean Global Wealth. "Maybe it's letting them pick out a reasonably priced souvenir on a family vacation. They are capable of understanding and retaining these things."
Two in three parents give their child an allowance, shelling out an average of $30 per week, according to a recent survey of 1,002 adults conducted by The Harris Poll on behalf of the American Institute of Certified Public Accountants. But only 3% of parents report that their kids primarily save what they get.
Encouragement from parents, though, can make a difference.
Bentley suggests one helpful exercise to help even younger children get used to saving: Let your child pick out a toy at the store. Explain how much it costs, and emphasize that they'll need to save up their own money if they want to take it home.
However old your child is when you start offering an allowance, make sure to give them a consistent amount on a consistent basis, "because it's like getting a paycheck," Paul Golden, managing director at the National Endowment for Financial Education told Grow earlier this year.
"It's a missed opportunity, generally, if you're not talking to your kids about money," says Golden. "It's still parents who have the most influence [on kids' money habits]. They're the front line of defense."
Bentley, who has taught more than 500 students over the course of her career, says that educators may feel uncomfortable incorporating finance-related concepts into their curriculum for fear that parents find the subject controversial or taboo. But the cost of avoiding financial conversation is a high price to pay, she says: "If these conversations aren't starting in the home, it can lead to so many issues down the line for your child because they won't be prepared to make responsible decisions when it comes to managing their money."
And, she adds, the stakes are high: "Not having that conversation can put your child in a position where they might fall victim to things like massive credit or student loan debt."
These conversations don't always have to be serious, either. You can even turn them into bonding activities, like by allowing your kids to weigh in on how they think a certain amount of holiday money should be spent. Giving them a sense of what financial responsibility looks like, says Bentley, can be invaluable.
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