In a world where we constantly hear about inflation, debt, and financial markets, it’s easy to forget the simple yet essential principles that underpin all of these complexities. One of the most important life skills that is often overlooked in school curriculums is the ability to manage money. Money isn’t just something you earn or spend—it’s a tool, a resource, and a habit that, and if taught early, can set children up for a lifetime of financial success. Teaching kids the principles of money from a young age isn’t just a good idea; it’s vital.
Last week we looked at money milestones that we should aim to achieve by age 30, but what if we started earlier. After all our greatest asset in terms of building wealth is time. The more time we have and and the better use we make of it, the wealthier we will be be.
When it comes to building good financial habits, the earlier, the better. Just like learning to ride a bike or mastering multiplication tables, understanding the basics of money becomes second nature when taught early. So why is it so important to teach our kids about money at a young age? Let’s break it down.
Building Financial Literacy from the Ground Up
Most of us learn about money the hard way—through trial and error, or by making costly mistakes. But imagine if we could equip our children with the skills they need to make smart financial decisions before they ever face these challenges? Financial literacy is a foundational skill, just like learning to read or write, and the earlier children understand it, the easier it will be to navigate the complexities of adult life.
Teaching kids about money at an early age gives them the tools they need to become financially responsible. From understanding the value of money to grasping the difference between needs and wants, children can start making informed choices about how to manage their resources. A study from the National Endowment for Financial Education shows that children who receive financial education early are better equipped to manage money as adults.
Take, for example, the story of Emily, a 10-year-old who learned about money management from her parents. Every month, Emily receives an allowance, and with that money, her parents introduced the concept of saving, spending, and even donating. Over time, Emily started to make more mindful decisions, like saving for a new bike instead of spending her allowance on candy. By the time Emily reached high school, she had already set up her own savings account and budget, managing money in a way that many adults still struggle to do. Teaching kids early gives them the confidence to make good financial decisions as they grow older.
Money Isn’t Just About Making It—It’s About Managing It
It’s not enough for kids to just learn how to earn money—they need to understand how to manage it wisely. The importance of budgeting, saving, and planning ahead is a skill that will serve them throughout life, whether they’re saving for a vacation, a new gadget, or their future college education.
One of the most powerful ways to teach children these lessons is by using real-world examples that they can relate to. For instance, if your child wants to buy a new video game but doesn’t have enough money, this presents the perfect opportunity to talk about budgeting. Explain how they can save up over time by putting aside a portion of their allowance each week. Not only does this teach them the concept of delayed gratification, but it also helps them learn how to plan and make conscious decisions about their money.
Consider the example of Jack, a 12-year-old who wanted a new phone. Instead of asking his parents for the latest model, Jack decided to save up his birthday money and a portion of his weekly allowance. Over several months, Jack tracked his progress and, in the end, was able to buy the phone with his own money. The feeling of achievement that came with this purchase taught Jack an important lesson: money requires patience and planning.
Teaching the Value of Hard Work and Earning
In today’s world, kids are more accustomed to instant gratification. They want what they want, and they want it now. But one of the most important lessons about money is that it doesn’t grow on trees. Money is earned through work and effort, and understanding this concept helps children appreciate the value of hard work.
Instead of simply giving kids money for chores, parents can turn this into a teachable moment. For example, when a child receives an allowance based on the work they’ve done—whether it’s washing the car, cleaning their room, or walking the dog—they begin to understand the direct link between effort and reward. This not only teaches kids about earning money but also about setting goals and working toward them.
Take the case of Alex, a 9-year-old boy who wanted to buy a new skateboard. His parents set up a system where he would receive a small amount of money for completing various household tasks. As Alex worked hard to save, he learned that the more effort he put in, the faster he could reach his goal. In addition to earning money, Alex also gained a sense of responsibility and pride in his accomplishments. By connecting effort with reward, kids learn that money is something to be earned, not handed over.
Teaching Kids About Saving and Delayed Gratification
One of the most crucial lessons when it comes to money is the importance of saving. In a world where credit cards and loans make it easy to buy now and pay later, teaching kids about the value of saving is more important than ever. Delayed gratification—the ability to resist the urge for an immediate reward in favor of a greater reward later—is a skill that takes time to develop but pays off in the long run.
An excellent way to teach kids about saving is by setting up a savings jar or even a separate bank account. Whether it’s for a specific goal like a toy or something bigger, such as college tuition, kids should be encouraged to save a portion of their money regularly. A fun and effective approach is the “three-jar method,” where kids divide their money into three jars: one for saving, one for spending, and one for giving. This allows children to see their savings grow over time while still having money set aside for immediate purchases and charitable donations.
For instance, Olivia, a 7-year-old girl, wanted a new bicycle. Instead of simply giving her the money, her parents helped her set up a savings plan. Every time Olivia received money—whether from birthdays, allowances, or odd jobs—she would allocate a portion to her savings jar. Months later, Olivia had saved enough to purchase the bike, and the sense of pride and accomplishment was overwhelming. Through this experience, Olivia learned that by practicing patience and saving consistently, she could achieve her goals.
Teaching Philanthropy and the Importance of Giving
In addition to saving and spending, children should also learn the importance of giving back to others. Instilling the values of kindness and generosity at a young age creates a sense of social responsibility that lasts a lifetime. By encouraging children to donate part of their money to charity or help those in need, they not only learn empathy but also experience the joy of making a positive impact in the world.
A great example of this is seen with Noah, a 10-year-old who decided to donate a portion of his birthday money to a local animal shelter. His parents had been teaching him the importance of helping others, and when Noah saw an ad for the shelter, he decided he wanted to make a difference. He was able to take a portion of his allowance and donate it, feeling a sense of fulfillment and satisfaction. By teaching kids about the value of giving, we foster a generation that understands the importance of helping those less fortunate.
The Role of Technology in Financial Education
In the digital age, kids are becoming more tech-savvy than ever. From mobile apps to online games, technology offers new ways to teach children about money. There are several kid-friendly financial apps, such as Greenlight or Bankaroo, that allow children to manage their money in a fun and interactive way. These apps help children track their spending, set savings goals, and learn about budgeting—all while playing games and earning rewards.
For example, Ava, a 10-year-old girl, uses the Greenlight app to manage her allowance. She sets goals for what she wants to buy and tracks her progress toward those goals. Through the app, she learns about how to split her money into savings, spending, and giving. Ava’s parents have also set up parental controls, allowing them to monitor her progress while still giving her the freedom to make decisions. Technology not only makes financial education accessible but also turns it into an engaging experience.
A Lifetime of Financial Confidence
Teaching kids about money isn’t just about giving them the tools to buy the things they want—it’s about giving them the confidence to make informed, responsible financial decisions throughout their lives. By teaching children the principles of money—saving, spending wisely, earning, and giving—we provide them with the foundation they need to thrive in an increasingly complex financial world.
The earlier we start, the better. Just like teaching a child how to ride a bike or tie their shoes, money management is a skill that becomes easier with practice. And as these kids grow into adulthood, the lessons they learned as children will stay with them, helping them become financially literate, responsible, and successful individuals.
So, let’s teach our kids about money now, before they learn it the hard way later. After all, the future is in their hands—and their wallets! Maybe we started our financial journey later in life, but we can set our kids up for success from day 1. Stay tuned for the next several blog posts as we explore this step by step.
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