The Benefits of Starting Early
Now that you have probed your own attitudes and are becoming fiscally conscious, it's time to ponder a desirable, intentioned financial education for your children. If you wait until they are older to teach them about money, not only do you risk their resistance, you will have missed many opportunities to help them form healthy attitudes and habits. Obviously, you'll want to tailor the lessons to their age, but by all means start early!
For instance, as soon as a child can count, you could introduce her to money concepts by playing games with pennies, nickels, dimes, and quarters. Preschool children aren't ready to add or subtract, but you can teach them the names of the coins and play counting games by spreading five pennies, three dimes, and two quarters across the table and asking them to pick up combinations of particular coins. Board games such as Chutes and Ladders and Candyl and also reinforce counting.
Around age three or four, you can teach your child to “play store” by letting her exchange paper money for goods or having her find coupons in the Sunday sale flyers for foods she likes. At the grocery store, give her the responsibility for finding the matching food and handing the coupons to the cashier.
For children under the age of five or six, you are basically teaching counting skills and planting a seed that will help them understand basic economic and financial concepts down the road.
Essential
Around the age of six, children are ready to learn mathematical concepts. According to scientists, they have formed a “mental number line” that allows them to distinguish between sizes and numbers, which means the more complicated construct of increasing numbers and quantities are now interlinked. This “conceptual construct” helps them compare numbers.
By the time they are eight, children are beginning to understand the dynamics of subtraction and addition required to make change. It's a good time to provide a weekly allowance that they earn by performing simple chores and that they use to buy treats or toys. Start small and adjust the amount of work and the amount of money upward as they mature.
It's also a good time to take them to a bank and explain how adults work to accumulate the money that goes into their checking or savings accounts, how banks work, and how ATMs work. Many children presume ATMs magically dispense money and that you can just withdraw whatever you need; it's a good idea to give them a very basic introduction to reality-based economics.
As you increase their allowance, open a savings account for them and tell them that 10 percent of their allowance will now go into this account so that it will grow. Show them the statements and explain how their money is growing.
