Money isn’t necessarily most important in life, but it is necessary to get through living. Eventually, children need to learn this and incorporate money skills into their activities and planning. Parents and caregivers play a major role in teaching kids how money works. When to teach children about money is a little up in the air, however. When you choose to develop financial literacy for your child depends on multiple factors.
Probably the most important thing to consider when approaching financial literacy for children is their cognitive development. To understand money fully, kids need to have a grasp of numbers. Developmental psychologist Jean Piaget divided development into four major stages, the second of which is the preoperational stage. This stage occurs between the ages of two and seven years old. As the Penn State College of Agricultural Sciences Cooperative Extension Better Kid Care Program explains, children can recite numbers at two to three years old but don’t necessarily know what numbers mean. An understanding of quantity doesn’t happen until about three to four years old, and between four to seven years old, children gain the ability to count, match numbers to the correct number of items and solve simple problems. Translated into money education for children, this means that children won’t really be able to work with money seriously until they’re at the end of the preoperational stage of development.
Teaching Kids About Money Before the Preoperational Stage
Even though children can’t work seriously with money until roughly four to seven years of age, it’s possible to introduce them to monetary concepts and activities earlier. For instance, you can bring them along with you on trips to the bank so they learn how to talk to tellers and the process for basic withdrawals and deposits. Similarly, you can let a toddler get cash or a credit card out of your wallet. From this standpoint, when to teach children about money depends on how socially and linguistically developed they are, whether they can follow basic directions, whether they can keep track of any money-related items you provide and how comfortable you are letting them participate in each monetary task. The more creative you are, the more ways you can find to involve money items in your child’s play and general day.
Another factor that supports the idea parents and caregivers should teach children about money even as toddlers is that even toddlers end up asking, “Can I have that?” or “Will you buy that for me?” Even if your child isn’t to the point of fully understanding numerical value, you still can explain that both purchases and saving require money and that, based on your circumstances, a purchase or savings deposit isn’t going to happen 100 percent of the time. The idea that purchase and saving power is limited by fund availability is one of the most foundational concepts in the course of money education for children—it is a difficult idea to get across because so many people rely on debit cards, credit cards and electronic payment methods where physical money is represented (abstract). Without this idea, it is difficult to move on to other monetary activities, even if your child knows what particular numbers mean.
Then of course there is the issue of whether other people expect your child to handle money. Even something such as needing to give an adult lunch money at school is a reason for your child to understand basic monetary units and counting. Others giving your child money for gifts is another indicator that it’s time to start a formal financial education. This generally starts during the elementary years.
The Bottom Line
The bottom line about when to teach children about money is that early is good and earlier is better. You simply have to be willing to adjust your teaching strategy based on the level of development your child has. Social indicators can be secondary guides about what your child should be able to do related to funds.