When are children old enough to learn financial literacy?
23rd May 2023 Managing your Money
Teaching financial literacy to your young children doesn't have to be complicated. Finance experts share the games and good habits that set kids up for success
As a parent, you probably want nothing but success for your child. And one of the keys to success is understanding how to manage money properly, knowing its value, and what money pitfalls to avoid.
But as a recent episode of Abbott Elementary points out (covering the popular egg drop science experiment), some concepts are just too advanced for year three students.
So, at what stage in childhood development can a kid really learn financial literacy? When are kids too young to learn about money?
The benefits of teaching children financial literacy at a young age
You might be surprised by the answer. “Research shows that children form their financial behaviours and habits by age seven,” says Jessica Pelletier, Executive Director at FitMoney, a new financial literacy platform. “So, we need to start teaching them about healthy money choices while they are developing their relationship with money.”
"Research shows that children form their financial behaviours and habits by age seven"
In fact, FitMoney starts its curriculum at age five, when most kids are in their first year of primary school. Financial literacy can’t be learned in a day. And the best way to keep kids interested in learning about money is through games and fun activities. Here Pelletier shares her expertise on teaching financial literacy to your kids through play.
When should children start becoming financially literate?
Healthy financial behaviours like saving money can be taught from primary school age
Financial literacy can take a lifetime. New forms of currency (think Bitcoin) and economic factors like a banking crisis can be topics adults still need to grasp. “For this reason, we encourage our teachers and caregivers to start talking about money as early as possible,” says Pelletier.
The idea is, if the adults in children’s lives can refresh their own knowledge, they can help their kids better understand some of the more difficult concepts of money management. “Financial literacy is about being confident that you have the skills and are competent to make decisions that will create a solid financial future.”
However, there are certain checkpoints children should reach in their journey. By toddler age, for example, kids should be learning delayed gratification and sharing. By year one of primary school, kids should start learning the responsibility of having pocket money, and by year two, kids should start practising saving behaviours.
Each age range for learning financial responsibility
Pelletier breaks down all the different age ranges and what each developmental stage should be learning.
Toddlers
- Delayed gratification and sharing
- Decision making
- Understanding time and number sequencing
Reception and year one (primary school)
Year two to year six (primary school)
- Borrowing responsibly by taking care of other people’s things
- Saving and spending decisions
- Goal setting both short and long term
- Dealing with financial challenges
Year seven to year nine (secondary school)
- Thinking about their financial future
- Exploring higher education options
Year ten to year eleven (secondary school)
What are the first steps to teaching financial literacy
The first step was probably already taken: children tend to watch how the adults in their lives make money decisions. So, the next step would be to begin the conversation with your children about money. “But it's important that we don’t make money out to be a scary topic,” Pelletier cautions.
Borrowing money can seem like a scary proposition. What if you can’t pay it back? But borrowing money is something most everyone will have to deal with at some point, whether it’s taking out a loan to afford a house or using a credit card for everyday spending.
"Children tend to watch how the adults in their lives make money decisions"
Approach scary topics like borrowing or owing money by framing them for the child to understand. “Think about something they borrowed, perhaps a bicycle from a friend,” she says. “Talk about how you want to treat that bike when you are using it, and when you plan to return it. Teach them how they should take care of someone else’s things by returning them on time and in good condition.”
Using everyday examples like this will help kids form long-lasting habits around borrowing and owing money.
What are some games kids can play to learn money management?
Specially devised games can teach children how to shop or envisage what they want to be when they grow up
Playing games around money management is a fun way to learn about financial literacy. The FitMoney $uperSquad was designed to be fun, engaging, and accessible to kids where and how they want to learn. “We also like to call it ‘parent-approved screen time,’ as kids can learn while having fun.”
The game developed by FitMoney follows four superheroes who look and sound like real kids, experiencing life as any primary school student would.
“We take them on adventures such as getting a gift card for their birthday, researching what they want to be when they grow up, and tagging along with their big sister as she shops for clothes to watch how and why she makes certain decisions,” says Pelletier.
A great tool for classroom teachers is the Financially Fit Certificate in the US, a self-directed programme that has certified more than 2,000 K-12 students.
“We have badge courses for middle and high school students that awards them for learning about everything from credit and debit to insurance and compound interest,” she says. FitMoney also has a Junior Certificate for third to fifth-graders that teaches them about taxes, the economy and responsible borrowing.
What can parents do early on to teach their kids financial literacy?
A good place to start is delayed gratification. Pelletier suggests teaching this concept to your toddler, but if you missed that lesson, you can quickly catch your older child up. “Many people can’t immediately purchase all the things they want,” she says. “And so, it’s something people of all ages struggle with.”
"Delayed gratification is a healthy habit we can start to form at an extremely young age"
“You can begin teaching a young child about sharing a toy with a sibling, thereby delaying the time they get to play with it, or shutting off television and games after a preset play time.”
This latter lesson helps children develop healthy habits that will provide them with skills for a lifetime. “All children are exposed to money early in their life, and it’s important that we don’t make them guess how to use it responsibly.”
Read more: What your money personality says about you
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