Chances are the skills with money management that you’ve either acquired or are still working toward didn’t come naturally. Since schools generally don’t teach much about money beyond how to count it, sharing the lessons you’ve learned or, better still, the lessons you wished you’d learned sooner may be one of the most valuable things you can pass on to your children. You don’t need to create a pre-teen Warren Buffett, but instilling a few simple ideas about money at an early age will last your kids a lifetime.
Kids as young as 3 years old can grasp the concepts of spending and saving. The University of Cambridge in England reported that research shows money habits form in children by the time they’re 7. Imagine the benefits of teaching how to save money at a time when your kids may still do what you tell them!
Children under 5
The important concept is that Want = Wait. This connects the idea that purchases require time to save, a critical defense when your late-teen or early-20s child gets their first credit card. Discussing why your are shopping on any given day helps to disassociate the notion that they can buy anything they want, any time they go to a store. When a child expresses a strong desire for a toy or other purchase, make the waiting process visual. Young attention spans may not connect the waiting time with a purchase unless they’re reminded. Perhaps a jar with a picture of their desire will do the trick. As coins and bills accumulate, the waiting process is visualized, even when accompanied by impatience.
Children between 6 and 10
This is the time to establish This or That. Involve your child in the purchase decision concept. It may be as simple as explaining why the store brand cereal makes it easier to buy something else, or how a family may choose between a vacation and a new television. While illustrating this idea works with family purchases, make sure to apply it to your child’s situations also, so that they know these concepts apply to them as well.
Children over 10
By this age, your children should naturally be ready for the idea of Free Money behind compounding interest. Since time and money have been associated since their earliest experiences, the idea of leaving money alone and there will be more later won’t be met with skepticism. It builds on the waiting is good concept.
With some thought and understanding of your child, you’ll be able to make messages that they can accept and process. It’s really never too early to build their good money habits. You want them to do well. Remember, they may pick your retirement home!