When do you teach your kids about money? Do you wait until they ask? Start the conversation when they first get an allowance, or when money lessons begin in school? Like many aspects of parenting, there are no hard and fast rules. Financial education is a process that starts young and builds in an age-appropriate way. Start too soon or go in with too much information, and kids get confused. Wait too long, and you risk becoming reactive as they inevitably make mistakes.
The good news is, that while research from the University of Cambridge shows money habits are set by the age of seven, parents have real power to foster financial literacy at home throughout kids' lives in various ways.
“As parents, not only do we have real power to teach our kids good financial habits, but there are so many good daily opportunities that you can use to reinforce this message,” says Louise Hill, co-founder, and COO of GoHenry. “What’s more, the earlier you start these conversations the better, as the best messages are those that are repeated often with real-life examples to back them up.”
What to teach your child at each age?
Age 3: How to count to ten
Children's brains develop in spurts called critical periods. The first occurs around ages 2 and 3, making this a great time to expose kids to various activities that lay a foundation for math and money skills. This is the age to bring into play counting songs that help them recite numbers from 1 to 10. Different-sized stacking blocks help them understand shapes and push their critical thinking skills. This creates a foundation for when they start learning how to count money, when they start preschool and elementary school.
Age 4: How to play number games
As your kids enter preschool and school, their grasp of number skills will take another leap forward. During this year, kids will be able to learn simple addition and subtraction problems (like 2+2 or 2-1) with the help of games. Roleplay also enables them to remember more, and you may see them playing with toy cash registers, plastic money and toy credit cards as they mirror real life and begin to understand how adults use cash to buy things. Throughout pre-kindergarten, kindergarten and grade 1, your child will learn how to count coins and typically know how to count money before they enter third grade.
Age 5: How to delay gratification
As they start school, it’s an excellent time to show kids how to delay gratification and wait for treats. Talk about this when you’re out and about, so they understand what it means. Also, as they learn to recognize numbers as part of the school curriculum, bring this into the real world and let them handle different coins. Let them hold on to the cash and show them that different items cost different amounts of money, such as buying toys vs post-school ice cream. Be ready to answer questions this age group will throw at you, such as where does money come from? How can I become rich? And use this to start an open, ongoing conversation about money.
Age 6: What to do with allowance
While there is no set age to when you should start giving an allowance, for those who choose to include it as part of their child's financial education it can be a helpful way to help kids learn about managing money. When kids get an allowance regularly, they can learn how to budget money and begin to develop crucial money management skills.
This is a good age to start them with a prepaid debit card such as GoHenry. Start with a small amount each week and use GoHenry to teach them the value of money. If you want to know how much allowance to give, GoHenry's Youth Economy Report data reveals that GoHenry parents are paying an average of $5.06 from the age of 7.
Age 7: How to understand the value of money
Research by The Money Advice Service reveals that most children can recognize the value of money and understand the link between earning money and income by the age of seven. By this age, most kids can plan, delay decisions and understand that some choices around spending are permanent. Help them see this in action by setting savings goals for Christmas and vacations.
Louise Hill says, “It may feel very early to be starting serious conversations about money, but our research shows that by age seven, many money habits will be set. This is the perfect age to introduce the value of money. Talk to your kids about money when you’re out shopping and actively show them how to look around for lower prices, how you think before you spend, and how to avoid overspending.”
Age 8: Help them understand what needs vs wants
While most 8-year-olds are capable of planning ahead, delaying a decision until later and understanding that some choices are irreversible, they are only starting to develop an understanding of the difference between ‘luxuries’ and ‘necessities’. So start conversations about needs vs wants when you are out shopping to help them gain a greater understanding of saving and spending.
Age 9: The power of savings
Around the age of 9, peer pressure starts – and with this comes the inevitable need for branded clothes, devices, and all the things other children have. This makes nine the perfect age to talk about good money-saving habits and saving goals and how to build towards that much-desired item every week.
“As hard as it is to witness,” says Louise Hill, “it’s incredibly beneficial to get your child used to making their own choices with their money – from deciding on what treats to buy, to whether or not they really want to buy Robux. This way they will start to understand the difference between spending their own money and spending yours – and they will soon see how fast their spending decisions impact how much money they have left.”
When looking at how much to save, you know your child’s situation best so you and your child can discuss what they want to save and set up saving goals on their GoHenry card.
Age 10: What is debt?
As kids approach grade 4 and 5, now is a good time to discuss debt and credit in the broader sense. With age comes more independence and spending without you at their side. This can mean they suddenly find themselves lending and/or borrowing money from friends, and either being in debt to others or running low on cash. This makes it a perfect time to discuss budgeting, balances and how debt happens.
Age 11: Understand advertising and online scams
As kids start middle school, they are more likely to have their own devices and start exploring social media, making age 11 the perfect age to start discussing advertising, online ads, influencer marketing and scams. Knowledge is power in this area, especially if you want to help your child avoid overspending and getting caught out by an online scam.
Age 12: Smart shopping
Smart shopping means helping your child to understand that there are various ways to ensure they get a good deal on everything they buy. Introduce them to price comparison sites that show the best price, and explain that discount and voucher sites offer money off on everything from food to fashion (and don't forget the discount offers in your GoHenry app).
Age 13: The cost of living and household costs
Start a discussion about the cost of living and use it to talk about unseen costs, such as heating, electricity and water. Involve kids in attempts to save money around the house from switching off lights to having a shower instead of a bath. Teaching teens how to budget like this can also help teens to understand the benefits of preparing for unexpected expenses that can crop up, such as repairing their car or replacing a broken smartphone.
Age 14: Investing
This is a great age to discuss investing especially as many kids will have come across cryptocurrencies by now via gaming. Stock markets are a little more complicated to understand. However, there are still ways to introduce the concept. One way to do this is by using a stock market simulator. This will allow your child to invest in fake companies and see how their investment changes over time. This is a great way to teach them about the risks and rewards of investing without any real money being involved.
Investing can be hard to understand, so try using an analogy that teens can make sense of, which shows how money grows.
Age 15: Credit and store cards
It's easy for kids to get confused about debit, credit, store cards and Buy Now Pay Later (BNPL), so this is an ideal age to start explaining how these work before they can apply for credit at the age of 18. Explain how they will be charged for borrowing money on credit, and how they have to pay back a lot more than they borrowed.
Age 16: Earning power and the world of work
Talk to your teens about their earning power as the world of work will now be on their minds. Our Youth Economy Report suggests teens have an entrepreneurial attitude, which means that 26% plan to be their own boss in the future.
Age 17: Credit reports
Explain to your teens that a credit report is a detailed breakdown of your credit history. Reports include:
- Your personal information.
- Details on lines of credit you have used.
- A list of companies that have asked to see your credit report.
It’s important to check your credit report to make sure that all the information is correct so that your credit history is in good shape when you’re ready to apply for a credit card, loan or even a mortgage.
Age 18: Student loans
Some students still don't realize that they will need a student loan for college. If they do, they are usually unaware of how much it is. Applying for a student loan is a great way to talk about loans, interest and repayments.
There are two types of student loans: federal student loans and private student loans. Federal student loans are issued by the government and they come with a number of benefits, such as fixed interest rates and income-driven repayment plans. Private student loans are issued by banks and other financial institutions, and they typically have variable interest rates and fewer repayment options.
Going through your 18-year-old's options with them and explaining it to them with actual figures can help ensure they understand what they are borrowing and repaying.
How can GoHenry help?
When you decide the time is right to start giving your children allowance, you can open a GoHenry account prepaid debit card online. Using the app, you can then set up regular allowance payments or one-off transfers, set chores and spending limits, and invite relatives to contribute via Giftlinks.
What's more, with GoHenry’s Money Missions, kids can develop their money skills and learn everything from budgeting and saving to investing and giving in a series of bite-sized interactive games and quizzes on our app. Money Missions works because it helps contribute to kids’ financial milestones in an effective and fun way. It’s designed to accelerate your child’s financial literacy, and help us achieve our mission to make every kid smart with money.
Better still, use your GoHenry parent app to track your child’s progress. When each lesson comes to a close, another one begins, and your child will unlock new levels as they progress. Educational and tailored to every child, it’s a great way to keep them learning.