In my attempt to get parents to be proactive when it comes to teaching their kids about good money management, the question that often pops up is, “where do I start?”
This is a good question in the sense that it reflects that the parents are ready to take the first step. The only stumbling block is not knowing the right time to introduce money concepts without getting their kids anxious or overwhelmed. Although money can be a hard-to-understand concept to kids, making it age-appropriate and breaking it down to their level makes it more palatable. A growing body of research suggests that money conversations with kids should start sooner rather than later. In this article, I will just give a breakdown of age-by-age money concepts to start with.
Early Childhood (ages 3 -5)
This is a preschool-going age, and at this level, kids are learning to count and match items. This period provides a great opportunity to introduce counting and sorting of coins. At this age, teach them to identify each coin even if they may not understand how much each coin is worth. The other interesting concept is teaching them that money can be exchanged for goods. Since kids learn best through play, introducing a play store will make the lessons more engaging and memorable. This is also the time to teach them life skills that will come in handy when they start managing their own money. This includes teaching them about patience, and how to respond when they don’t get something they want right away. The simple lesson of delayed gratification will benefit them for the rest of their lives. You can start introducing the saving of coins in a piggy bank or money box, which will reinforce the concept of delayed gratification.
Middle Childhood (ages 6 -12)
It is during primary school that kids begin to understand how much items are worth – price. It will be therefore ideal to help them differentiate between needs and wants, and how to prioritise. In this context, they will appreciate that they cannot have everything they want. You can gradually transition from a play store to doing the actual shopping in a real store.
This is a good time to give them pocket money or allowance which they will have to learn to manage by themselves. Teach them to have a budget, allocating their pocket money towards savings, spending, sharing, and investing. Goal-setting becomes critical during this period. They will have to learn how to align their budget with their financial goals and values. Once they understand the concept of saving, open a savings account with them. Make a trip to the bank such that they experience opening and owning a bank account. Explain to her the difference between a debit and a credit card. Show her the cards you have and what they are used for, including rewards cards, and other cards that are used to transact.
Besides giving them pocket money, get them to earn their own money by doing special chores (separate from their daily duties in the house) or by starting a small business. They will get to appreciate that money is earned, and one has to work for it.
One other aspect that should be introduced at this stage relates to advertisements. Since middle school is all about fitting in and looking cool, this is the time to enlighten them on how adverts are used to manipulate people’s emotions to get them to buy more. Help them make wise purchases such as buying quality. Kids need to know that price is not always an indicator of quality, they need to assess the product before buying.
Teenage Stage (ages 13 – 18
Teenagers can start making financial decisions independently. But parents have to guide them on how to make better-informed decisions and keep an eye on how they spend their money. Lack of monitoring may open room for illegal purchases such as drugs and alcohol. Enlighten them about borrowing and the consequences of failing to pay. Explain the concept of interest rates and how they relate to borrowing and saving. This is also the time to get your kids to start setting long-term saving and investment goals. Get them to learn and interact with the stock market. Help them to live a balanced life – academics, extracurricular activities, community projects – and maintain a clear view of the career path they would like to follow.
The bottom line is, money may not be everything, but it can be used to achieve one’s goals in life. Parents should help their kids develop a positive attitude towards money, thereby creating an abundance mindset rather than a scarcity mindset.
*Otisitswe K. Tawana-Madziba is the founder of Fin-Edu, a social enterprise that empowers young people with social and financial education. Email: [email protected].
