According to Bank of Ireland’s Rory Carty, children as young as four or five are capable of grasping basic financial concepts when taught in an engaging way.
“Activities like saving for a toy can help them understand the difference between spending immediately and saving towards a goal. These experiences not only teach math and planning skills, but also instill a sense of achievement and excitement when they reach their savings target.”
A jar is probably all you need at this point; they make a satisfying ‘ding’ when the coins drop in, and a child can easily see their cash start to build up. At this early stage, Paul Cawley of Lifestyle Financial Planners says, it’s about basic money recognition, counting coins, and distinguishing needs from wants…
Between ages eight and 10, you can introduce children to the notion of saving for longer-term goals. If they feel they are not getting enough of an allowance, you can increase it a bit, and then let them earn more by doing more. At the tween stage, you can give them a small loan here or there so they begin to understand the concept of debt.
In the early teens, says Cawley, you can talk with them about banking fundamentals, the concept of interest, and digital payment literacy.
“By the age of 16 to 18, they can get to grips with more comprehensive budgeting, have an understanding of credit and tax basics, and start preparing for financial independence. Older teenagers can handle, and want to understand, complex financial scenarios and long-term planning concepts.”
By now they will probably be well-versed in using apps to track saving and spending, and at this stage, parents should be routinely chatting with them about impending costs around college, buying a car and so on. It’s also a good time to encourage them to get a part-time or summer job to boost funds, as well as discuss how to avoid financial scams.
Everyday life
The key for parents, says Carty, is to make money part of everyday conversations.
“Whether it’s discussing the weekly food shop, planning for a trip or explaining how bills work, these moments offer valuable teaching opportunities.”
For example, he says, next time you go food shopping, make a list in advance. Ask the child to select five items. Of those, ask them to make a note of the highest and lowest price that item could be purchased for at the shop.
“This will encourage comparison shopping; you want them to learn that there are many options for buying the same thing.”
Other opportunities to teach children about money arise through household budget chats, savings-goal tracking and structured allowances. Age-appropriate conversations about family expenses help children understand money has limits and requires allocation decisions. When it comes to savings goals, whether you use physical piggy banks or digital trackers, visualizing progress towards specific purchases teaches “delayed gratification and goal achievement”.
Also, regular and predictable income allows children to practice budgeting safely.
“The key is consistency and non-interference with their choices within reasonable boundaries; let them experience both good and poor decisions whilst the stakes are low,” says Cawley. All of these activities, he notes, cost very little but provide invaluable financial education…
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Talking about money with your kids does not have to be boring, or stressful. And you don’t have to make any special effort. Just be open about money, look for regular opportunities to have financial conversations, and build on what they already know. Teaching your children about money is a process, not a one-time thing. No matter their age, jump in and get started. They will thank you for it later!