Children between the ages of 5 and 14 have direct
purchasing power of more than $40 billion a year and influence $146
billion worth of purchases. Yet, few children are taught, either
in school or at home, about managing money.
With schools forced to make tough choices on
which "noncore" subjects to include in curriculums, parents
are often left to teach financial skills on their own. For parents,
many of whom don't feel confident in their own money-management
prowess, teaching their kids how to manage money can be an intimidating
But don't put off addressing the issue. One point
on which all of the experts agree is that parents must be willing
to allow children to make mistakes in their purchasing decisions
if they want to teach financial responsibility. It's much better
to let children make, and learn from, those mistakes early with
small amounts of money than later in life when they can find themselves
in serious financial trouble.
"One of the biggest mistakes parents make is
not allowing their children to have control over their own money,"
says Susan Beacham, founder of the Money Savvy Generation, an educational
money-management organization in Lake Bluff, Ill.
Here are some strategies for teaching kids
of all ages about money.
3 years and under
Most experts agree that the sooner parents start teaching their children about
money, the better. "I would encourage starting earlier than you even thought
you would," says Beacham.
Even at age 3, you can begin
giving children an allowance. What usually happens? They play with it, they forget
where they put it or they lose it. That's OK. Children are learning that money
is of value and needs to be kept in a safe place so that they know where it is
when they want to use it.
In today's consumption-driven society, teaching children to save
and invest is a challenge. To teach children the important savings-related
concept of delayed gratification, try using a technique known as
"one now, two later." The technique is based on a study
conducted at Stanford University that identified a correlation between
delayed gratification and lifelong success.
In the study, a researcher gave 4-year-olds a marshmallow.
The researcher then told them that if they could wait to eat the
marshmallow until he returned from running a 15-20 minute errand,
he would give them an additional marshmallow. When the same children
were studied 14 years later, the children who were able to wait
to receive the second marshmallow before eating the first one were
more positive, self-motivated, persistent in the face of difficulty
and able to delay gratification in pursuit of their goals. Researchers
also found that the self-discipline required to delay gratification
can be taught by parents and teachers.
age, pay particular attention to the message you are sending your children about
money. Children are excellent observers and will mimic the attitudes, behavior
and language that they see their parents and other adults use.