Financial literacy: Teaching kids about money

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Follow these money milestones to teach your preschooler, tween or teen about the basics of money.

Key points

  • When teaching money to preschoolers, start by teaching them to practice patience and how to count.
  • School-aged children can begin receiving an allowance and learning the cost of household items.
  • Tweens will feel empowered about money if they have a savings account. Teach them to be critical consumers by talking about how advertising companies work.
  • Teach your teenager about money by talking about how investing works and suggesting a part-time job.

Parents can teach money management to kids of any age. Whether your child is in preschool, middle school or high school, follow these simple money milestones.

Talking about money to your preschooler (2 to 4 years old)

Practice patience

At this age, your preschooler can start learning the importance of not getting things immediately. Try not giving into their wants right away. For instance, if your toddler demands a candy, ask them to wait 10 minutes for two candies. Encourage them to have patience. The benefits of delayed gratification will prove useful as they get older and start handling money.

Teach preschoolers to count

Preschoolers are too young to understand the concept of money. But it’s a great age to introduce the basic math skills, such as counting. Studies show engaging in simple math activities with toddlers significantly predicts their skill level in math later on. For example, give your child a mixture of coins. Have them count how many there are. After introducing the name of each coin, let your child pick out a new coin every week. Along with improving their math skills, they will learn the name and value of each coin.

Talking about money to your school-aged child (5 to 8 years old)

Start giving an allowance

Many experts agree that a good age to start giving your child an allowance is when they enter their school-age years. This will help them learn the skills of saving and waiting to get something they want to purchase.

Teach the cost of household items

Most eight-year olds have grasped basic math skills like addition and subtraction. Let your child help with the basic adding and subtraction when balancing your checkbook. This exercise teaches that bill payments are a reality when you grow up; but paying bills is not a problem if you save money.

Talking about money to your tweens (9 to 12 years old)

Open a savings account

Opening a savings account for your tween gives a sense of ownership. It fosters the ability to save up for things your child needs and wants. However, make sure you control withdrawals. Your child should talk to you about large purchases first. For additional incentive, you can even offer to match every dollar your child contributes.

Teach how advertising works

Many tweens and adolescents are exposed to the constant pressure of conforming. Advertisers use marketing techniques to manipulate this insecurity. Studies show that kids are a continual target of many advertising companies. To help your tween become more critical of advertising, go through a magazine together. Point out the many different advertisements. Talk about how marketers manipulate emotion to sell a product. Do the same exercise with your child when watching TV commercials. Over time, your child will learn how branding works and become a more critical consumer.

Talking about money to your teenager (13 to 18 years old)

Learn the basics of investing

By now, your teenager should have heard the word ‘investing’. Encourage your teenager to ask about financial concepts they do not understand. A good starting point is to explain how the stock market works. Avoid using too much jargon; just start with the basic principles of how one can make money from investing. Show them a historical graph of the TSX, for instance. This provides a visual when explaining how stocks work: there is a risk of losing money over the short term, but over time you tend to make more money.

Suggest a part-time job

At this age, young teens start going out more often with their friends on their own. To give them a sense of responsibility and teach them how to manage money, encourage your teen to take on a part-time job. They will learn how things you purchase are measured by time in the hours you work. Your teen can develop a better understanding for the value of work and money, and learn to manage purchases in a reasonable way.

Last updated: March 28th 2012