Imagine a world where children confidently navigate the maze of money management with ease. Now, picture them making smart money choices, setting themselves up for a secure financial future. Growing up, my parents always told me, “One one cocoa full basket,” an adage highlighting the power of saving that resonates with me even today. Clinical research consistently shows that the formative years of a child’s life are critical for developing cognitive and behavioural skills, including attitudes toward money. During this crucial time, children closely observe and mimic the behaviours of adults around them, absorbing both words and actions. Teaching children about money is not just about numbers; it is about equipping them with the tools to shape their financial success. As we celebrate May as Child Month, it is an opportune time to reflect on your role in guiding children to become fiscally responsible adults. What messages are you sending them about money?

How Early Should Financial Education Begin?

It is important to teach children about money as early as possible, although the ideal age to begin may vary given that children learn at different paces. Behavioural researchers at Cambridge University encourage parents to begin money conversations as early as three. By this age, children begin to learn lifelong money habits, and by seven, these patterns become more established, making it increasingly difficult to reverse bad money habits. However, it can be difficult to teach children the pillars of financial literacy such as debt management, budgeting, saving, and investing—if parents/guardians are not financially literate. Well, the good news is that, as you begin to achieve financial literacy, they are more likely to follow suit.

Here are some ways to teach children about money.

Kindergartners

A piggy bank is perhaps the most universal and effective method used to cultivate the habit of saving in younger children while helping them to identify various denominations of money. Using a piggy bank allows children to watch their savings grow and encourages them to consistently set money aside. Once their savings are at a certain point, consider allowing them to use the money themselves at the store to buy something they have been saving towards. This will also familiarise them with the concept of saving to purchase desired items.

Money lesson: The value of saving and goal setting.

Prep/Primary School Children

During these ‘tween’ years, children would have already grasped the basic money concepts and understood the purpose of money, making it an ideal time to introduce the concept of opportunity cost. Some children receive an allowance or ‘pocket money’ for completing household chores at this age. Let us say they are faced with two options: purchasing a videogame or a pair of sneakers. In such situations, children should be encouraged to make decisions based on their savings. They should learn to weigh their options and understand how far their money will stretch by comparing the costs of the different items. This exercise teaches them the value of making smart financial decisions and understanding the trade-offs involved in spending their money.

Money lesson: Budgeting is necessary for financial success.

Teenagers

By adolescence, children should have a strong understanding of money principles. It is time to teach them more responsibilities and give them a deeper insight into long-term financial planning. By now, the piggy bank would have been replaced with a savings or investment account allowing them to learn about the power of compound interest. During this period, peer pressure may start to influence their spending decisions. However, it is crucial to emphasise the importance of planning for their financial future. Teach them that a bank account is not simply there to withdraw money to buy things, but a money management instrument, much like an investment account, that can help prepare them for the future. Encourage them to differentiate between short-term wants and long-term financial needs by prioritising saving for goals like higher education and investments rather than impulse spending. This is also a prime opportunity for parents and guardians to teach teenagers about budgeting and financial planning. It is best to instil these habits while they are still living at home, rather than later when they might face financial difficulties due to poor money practices.

Money lesson: Invest for a better future.

College-aged Children

As young adults on the cusp of entering the professional world, it is important for college-aged students to confront the realities of financial responsibility. This period is an ideal time for them to learn about debt management and the perils of excessive borrowing or spending. While some debt may help to propel them forward in achieving their goals, they must understand the implications of debt, such as student loans, which can become a financial burden if they are unable to find a job after graduation. College-aged students should also comprehend the risks associated with credit card debt and compound interest, which can also derail their long-term goals. Although credit cards have benefits, it is essential to use them judiciously. A recent report from credit rating company Moody’s reveals a concerning trend that American credit card delinquency is now well above 2019 levels and is expected to keep climbing. While some college-age children may have been introduced to budgeting, reliance on stipends from their parents without supplementing it with income from a job can lead to overspending and accumulating high-interest debt. Therefore, parents/guardians must instil responsible financial habits early to help children avoid falling into the trap of excessive debt.

Money lesson: Avoid bad debt as far as possible.

The early stages of a child’s life are crucial for instilling essential money habits that will shape their financial future. However, it is never too late to start even if you did not begin at the kindergarten stage. By creating an environment that prioritises financial education, you can empower children to become fiscally responsible adults who make informed financial decisions and secure a future in which they are financially independent. As we celebrate May as Child Month, dedicate a few minutes each day to teach your children the value of saving and goal setting, budgeting as a vital tool for financial success, investing for a prosperous future, and the importance of avoiding bad debt. These fundamental money lessons will pave the way for securing their long-term financial well-being and fostering good financial habits.