Childhood holds a lot of major financial milestones. There’s your first allowance, your first bank account, your first paycheck and that first big purchase you make all by yourself. But exactly when should kids hit their very first financial milestones? What’s the best time to really start teaching them about money and the way it works? Well, based on recent studies, the answer really seems to be the sooner, the better. Research from Cambridge University suggests that we develop the money habits that will stick with us for life by the time we turn 7. That means, as a parent, you will have a major impact on whether or not your child grows up to be financially responsible. It may seem like they’re way too young, but even if your little one is still a toddler, now is the perfect time to start teaching them about finance.
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Of course, you may not want to start your kids off with the big stuff. 401ks and retirement funds can probably wait until they’re out of training pants, but this is when you can start instilling the basics upon them. And there’s probably no lesson more basic than explaining what, exactly, money is. Most of us probably don’t remember precisely when we learned about the concept of money; it was just something that was always a part of our lives. We saw our parents using it to purchase everything from food to clothing before anyone even told us what it was. As a parent, you should really try to get in front of those preconceived early childhood conceptions. Don’t let your child see you spending money without explaining what it is, and even more importantly, that it doesn’t grow on trees. It’s very easy for a child who isn’t taught otherwise to start thinking of money as an unlimited resource, something that a parent just pulls from a wallet or purse like magic. That can create bad, impulsive spending habits that stick with them forever, even after they learn better.
Involving them with your actual financial decisions is another great place to start. When you go shopping, don’t just have them stand idly by and watch you. Explain to them what you’re doing and how you’re deciding what to buy. Let them make little decisions for you. If there are two brands of cereal they like, let them decide which one you should buy. It will get them to start realizing that having money doesn’t mean getting whatever you want; it means making smart, responsible choices. If they enjoy shopping, you can even set up a pretend store for them when they get home and let them experience it from the other side of the cash register. It’s not only fun, but experts also say it will help your child begin to learn the basics of commerce.
You should also start exposing them to actual money. Little kids love simple identification games, especially ones that involve touch and texture. Make a game of laying out a bunch of coins and letting them tell you what each one is and how much it’s worth. You can let them keep a few coins after each game as a reward. This also serves as a nice gateway into the next big financial lesson you should be teaching them: saving!
Saving up for big-ticket purchases takes patience, something most children don’t have in abundance. But you can help them develop it. Let them pick out a big item they really want, and encourage them to slowly save their coins for it. You can make it fun by putting up a chart in their room that tracks their progress. And, of course, there’s always that old childhood standard: the piggy bank. Kids still get a thrill from plunking their pennies into these little ceramic friends. (If they don’t like pigs, they can get a bank in pretty much any shape they want, from superheroes to princesses.) You can let them trip up along the way; if they decide they want to spend some of their saved money on an impulse buy, that’s totally cool. Just make sure they see that an impulse buy today means it will take them that much longer to get that big thing they really want. The important thing is that they start to develop a sense of pride in their ability to save. When they finally reach their goal, it will be all the more thrilling because it was something they did all by themselves.
All of these lessons can be amplified by a bunch of great apps and games that can teach kids about finance as soon as they’re old enough to pick up a smartphone. There’s even a virtual piggybank that will let them count their money while you hold on to the actual cash. There’s also a whole host of educational books and television shows developed to teach kids about finance. However, it is recommended that if you are going to expose kids to any television at this age, even educational shows, that you do your best to shield them from one of the biggest threats to their responsible financial development: advertising. Extremely young kids can have trouble distinguishing between entertainment and advertising and are much more susceptible to their suggestions. Although avoiding ads altogether isn’t really possible in today’s world, modern technology has made navigating them much easier. Netflix, Amazon, HBO Go and other streaming sites have lots of great kids shows presented completely commercial free, and if your kids do want to watch something off live TV it’s easy enough to record it and fast forward through the commercial breaks. Of course, it could be argued that the best kid’s TV has always been commercial free thanks to all the amazing shows on PBS.
Teaching toddlers about financial responsibility may seem a bit overwhelming, but it doesn’t have to be. It can be as fun as playing a game of store, watching an episode of “Sesame Street” or watching their little faces beam with pride when they finally buy that coveted toy all by themselves. Learning about money can be a truly enjoyable experience for a toddler, and you’ll enjoy knowing there’s a safe and secure financial future ahead.