Key Takeaway: Introducing financial concepts early and practically is crucial. Start with basic ideas and build on them as your child grows, using everyday opportunities like shopping and allowances to teach valuable money lessons.
When should these conversations start?
Ultimately, each family is different, and what feels right for one won’t necessarily be the best timing for another. From a young age, children will start to develop an understanding of basic math in the classroom, and using money as a conduit for enhancing their knowledge is a great way to introduce the topic.
They will likely start to recognise money by two or three-years-old, but when they reach five or six, they will generally start to grasp the concept of money, and even begin to form opinions and attitudes towards it. Conversations at this stage should be kept fun and engaging – it’s generally advisable to save introducing more serious topics until they’re slightly older.
The value of pocket money
Pocket money or an allowance is a great way to introduce children to the principles of financial management. Even if it's a nominal amount of money you give them each week, giving them some level of responsibility will help to shape their attitudes towards money and the value of it.
According to one survey, 75% of parents first gave pocket money to their children between the ages of five and seven. Whether you tie it into their desire for a particular toy or item (and introduce them to the importance of saving) or perhaps reward them for helping out around the house, there are lots of helpful habits you can start to instill at this early stage.
Take them shopping
While it's a menial task for adults, don't underestimate the value of taking your children on regular trips to the shop when trying to introduce them to the concepts of money and spending. Before you go, you could ask them to tear out coupons or bring along any vouchers you have. This not only makes them feel like they're being helpful, but it also touches on the value of saving money.
Similarly, you could ask for their help with writing your grocery list. This will encourage them to think carefully about 'needs' and 'wants', and introduce the principles of delayed gratification. At the shops, encourage them to help you look for different items while paying attention to the prices and sticking to your list.
- Children recognize coins and bills as "money"
- Simple concepts: "We need money to buy things"
- Play store games to make learning fun
- Use clear jars to show saving progress
Ages 5-7: Basic Understanding
- Introduce the concept of earning money
- Start small allowances with simple rules
- Teach difference between needs and wants
- Practice counting money and making change
Practical Financial Education Tips
Frequently Asked Questions
What's the best age to start teaching kids about money?
Most experts recommend starting around age 5-6 when children can understand basic math concepts and begin to grasp the idea that money is needed to buy things.
How much allowance should I give my child?
A common guideline is $1-2 per year of age per week. For example, a 7-year-old might receive $7-14 per week. Adjust based on your family's budget and values.
Should allowance be tied to chores?
This depends on your family's approach. Some parents tie allowance to chores to teach work ethic, while others give a base allowance and offer extra money for additional tasks.
How can I teach my child to save money?
Use clear jars or savings accounts where they can see their money grow. Set specific savings goals for items they want, and celebrate when they reach their targets.
What if my child wants to spend all their money immediately?
This is normal! Use it as a teaching moment about budgeting. Consider implementing a rule like "save 1/3, spend 1/3, give 1/3" to encourage balanced money habits.