The other morning I had an amusing conversation with my four year old that went a little something like this;
“Mummy, can we go to the York on a plane on holidays?” did he mean New York perhaps??
“Maybe one day, but it costs a lot of money to go there so we have to save first”
Looking somewhat bewildered that I didn’t just open my magical wallet and hand over the moola, he replied “but you’ve got money mummy, I’ve seen it”.
I proceeded to explain how we have to earn money by working and then decide how to spend that money so that we have enough for what we need and can save for what we want. He just looked at me blankly and said “but grandpa has lots of money, he can pay”…..queue exasperated sigh!
So when is an appropriate age to speak to kids about money?
You can start introducing the concept of money as soon as they are old enough to understand. Start with a reward chart system in which each time they do a chore, they get a tick and when they earn a certain number of ticks, they earn some pocket money (a small amount to begin with). This teaches them the concept that money is something that is earned and doesn’t just happen. You might consider using a jar system where the pocket money they earn gets split into jars for different purposes. E.g. a ‘spend’ jar and a ‘save’ jar, to introduce budgeting in a really simple way.
While you don’t want to deprive your children of the things that they want, it is important to find balance so that they learn the value of money and the difference between a want and a need. Even if you are well off financially and you can afford to fulfil their every desire, delaying gratification early is an important step to learning the value of money. You can try explaining how many hours you have to work to earn enough for the toy that they’ve been pestering you for. This will help them to make the connection between work and money. If they have to wait, they’re more likely to value it.
As children get a bit older, you can start to speak to them in more detail about money and budgeting. You could try helping them to prepare a budget for a particular project they are interested in or doing a mock household budget with them. Try showing them a utility bill and teach them how turning off unused lights can reduce the bill so that there is more money left for other things. You can help them to save for something that they really want with their pocket money.
To give you a scary statistic, research has shown that children develop spending habits by about the age of 7. Even if you implement all of the above suggestions, above all else, it’s important to set a good example and practice good budgeting and spending, as children pick up good and bad habits from their parents.
As the old saying goes, money doesn’t grow on trees – it’s an important lesson in life!