How to Raise Fiscally Educated Children
It’s a no-brainer that we should be teaching our children about money, but when is the best time to start? When they start to count? When they begin receiving pocket money? When they are getting ready to leave school?
According to research by the University of Michigan, children are able to understand the concepts of spending and saving by the time they are five years old. The Centre for Financial Security at the University of Wisconsin-Madison found, “It has been shown that children make great strides in economic understanding between the ages of six and 12, such that children’s understanding is, ‘essentially adult’ around age 12.” So from six to 12 years old is the best time to start.
At MoneyTime, we’ve sat in classrooms, talked with hundreds of children and teachers and read a whole pile of research. With the knowledge acquired, we’ve developed this progression which you may find helpful: For ages 3-6, the four essentials children should learn are Earning, Spending, Saving and Giving.
From age 6, children begin to understand cause-and-effect relationships, which changes the way they perceive money. By this point, they are able to understand:
• Items can have a value greater than or less than other items
- People work for money
- Needs are not the same as wants
Around age ten, they begin to develop a sense of reason, transforming from emotionally-driven to rationally-driven decision making. This is the time to expand their financial knowledge to include long-term consequences such as credit, debt, interest, budgeting and identity theft.
In their early teens, they begin to grasp abstract concepts and develop a sense of long-term consequences. This is a good time to introduce investing in different ways, such as property, shares and business.
From a practical standpoint, it is in the later years of primary school (years 7 and 8) that most children start having a meaningful amount of money to spend, from pocket money or doing jobs. They are also starting to become aware of the power of money and the things they can do with it. We believe this is the ideal time to build an awareness of how money works in the world and to develop good lifelong financial habits. That is why we designed MoneyTime for years 7 and 8. We are looking to build good habits and positive attitudes right at the time they are starting to make their own financial decisions.