With study after study showing that the majority of kids are woefully behind in terms of understanding and applying financial concepts, it’s no surprise that parents are looking for ways to teach their kids about money. That said, not everyone has a lot of money to spare, which begs the question, “Do kids really need money to learn about it?”
The simple answer is no. Let’s take a look at why.
Finance is not about money. It’s about concepts and processes.
Almost everything that has to do with money is somewhat abstract and arbitrary. You can tell your child what a dollar is, for example, but in order for him to really grasp its value, he has to be able to make some comparisons – a dollar buys a candy bar, for example, or is the same as 100 pennies. In other words, what people know about money is based on the world, and on a collective agreement about meaning that is, to a large, degree, culturally constructed.
Money is also about how people use the ideas they have about currency. People have a process for getting a loan, for instance, or even for making a basic deposit in a bank. The methods individuals have for handling funds are not necessarily the same from region to region, as is evident from accounting department to accounting department, bank to bank or law to law – this happens simply because more than one viewpoint on the same issue is possible. As a result, a big part of teaching finance is teaching kids how to apply a specific series of steps to reach distinct money goals, always working within the confines of approved behaviors.
Taking this into consideration, kids learn about the world and how to behave primarily through experience. It’s only by touching a kitten, for example, that a kid really understands what the fur of a kitten feels like, and in the same way, a child learns what is “right” to do by watching, copying and receiving various types of reinforcement from other people. In the finance education world, this absolutely means a child needs the opportunity to be involved with money processes in order to carry them out properly. The abstract nature of value, however, means that actually having coins or bills isn’t always a must.
As an example, take video games. They often include money systems that are entirely made up, incorporating imaginary items of value and rules that don’t exist in the real world. Even though these items and rules are just part of a story, kids are able to get the concept of how the made-up money systems work, carrying out transactions to buy supplies, spells, life and other items for their characters.
Looking back a little further, historians point out that extremely early societies didn’t really have formalized money at all. They relied more on a barter system, coming to agreements such as one sack of rice was the same as, say, a bowl of potatoes. In these societies, virtually everything people did with money was concept-based.
BUT don’t forget age appropriateness and cognitive development!
Even though kids clearly can get money concepts eventually, the ability to reason abstractly isn’t with a child from the moment they are born. It develops over time as their brains physically mature and they gain experience. At first, it can help your child to have something tangible to make the concepts easier to understand, which is why many experts recommend letting kids handle physical cash early on. The something tangible can be anything, though! bankaroo, for example, lets kids use items like hearts to save toward specific goals.
The Bottom Line
Having a lot of money doesn’t automatically guarantee that someone easily can learn about finance, and in the same way, being flat broke isn’t really an excuse for not introducing money ideas and processes. Parents can use whatever “clicks” with their child, along with everyday opportunities, to provide good financial practice that will solidify money concepts.