Money Lessons by Age: Teaching Kids Good Financial Habits

Money Lessons by Age: Teaching Kids Good Financial Habits
Friday, January 19, 2024 by Becky Cerling Powers

Categories: Parent Powerline

Money lessons: Teaching Children Good Habbits

I don’t remember how old our daughter Jessica was, or what she did to make me think she needed correction. She was probably about six. All I remember is how shocked I was when my attempt to give a simple, logical consequence produced a shrieking melodrama.

Jessica’s allowance was twenty-five cents a week (back in about 1980), so I thought a reasonable penalty for misbehavior was a three-cent fine. It wouldn’t bankrupt her – just make her think twice next time, right?

Money Lessons:Wrong. Wrong. Wrong.

When I told my little daughter she had to give me three of her pennies, she reacted like I’d told her I was going to chop off three of her fingers.

She wailed, she sobbed, she set the house vibrating with her grief.

It was genuine distress, too. She was not manipulating me —although I was afraid that if I handled the situation wrong, she’d learn to put on a show like this again next time when she wanted her way.

I also realized I’d misjudged Jessica’s maturity. She was bright. She could count money and she could make change. But, she was not cognitively ready to reason or emotionally ready to understand the meaning and value of 3 pennies. My consequence was not age-appropriate.

So I told her we could make some change. If she gave me a nickel, I’d give her two cents.

Her tears subsided, I gave her one coin, she got two coins back, and I postponed using fines for discipline until she was 9 or 10.

**So, are you teaching your kids how to manage money?**

Teaching children money management is an important part of good parenting, and it can start as early as preschool. But to successfully teach good financial habits, we need to understand what to teach and when. Here are a few suggestions from Consumer Credit Counseling Service at the El Paso YWCA for tailoring your teaching to children’s levels of emotional readiness and ability to reason:

Preschoolers are concrete thinkers.

They have trouble grasping abstract ideas like money, space and time. Since a nickel is bigger in size than a dime, preschoolers think it’s worth more. They need a simple experience buying items at the store. So, let them hand the money for purchases to the store clerk.

First and second-graders have trouble making choices and are still unrealistic about what money can buy.

It’s hard for them to understand that today's decisions bring consequences tomorrow.

So, give them a small amount to spend. Show them items they can buy with that amount. This helps train them to limit spending to a budgeted amount. Above all, don’t reward begging by giving in to it.

Third and fourth-graders benefit from receiving an allowance.

Doing simple price comparison problems with a pocket calculator is helpful for them, and so are parents’ explanations about the why of some of their family shopping choices.

Children this age also can begin running errands, first with an older brother or sister and then by themselves. They can take money in a change purse, and then buy one or two grocery items and bring back the change. These activities are an important step toward being able to shop independently in a few years.

Preteens usually like to shop and are ready to buy some of their own clothes.

Since preteens can handle greater responsibility, they can start earning money by doing odd jobs at home and elsewhere—which is fortunate because their activities with friends, hobbies, and school activities cost more. They can learn simple budgeting, saving, and even simple investing.

Teens feel a lot of social pressure to keep up with the crowd

They want to dress like their friends, do what their friends do, and have whatever “everybody else” has. They want to be independent and make their own decisions, but their financial dependence gets in their way.

Responsible independence is the goal. Teens can work on that with their parents. If they show responsibility for handling their allowance, increasing the amount to include a clothing budget is helpful. Teens are more likely to be reasonable about money issues if they have developed experience handling money responsibly since they were small, and if they understand the relationship between their spending and the family’s income.

Teaching kids wise money management is an essential goal of good parenting.

When kids learn to budget, save, and even invest before they leave home, it can prevent a world of trouble for them later in life in many areas, not just their finances.

My next blog will explore best practices for using a teen allowance to help teenagers become financially independent.

Reprint with attribution only: https://beckypowers.com/

For more parenting insights from Becky Cerling Powers see her blog at www.beckypowers.com and her parenting book Sticky Fingers, Sticky Minds: quick reads for helping kids thrive in the Bookstore

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