Helping Kids Build Healthy Financial Habits

Building healthy financial habits is no easy task for a lot of adults, let alone kids. If you ask a kid what they would do with $100, majority of kids would say spend it. Kids observe adults from an early stage, picking up money habits and beliefs that they later rely on as adults. Below are some points to help guide your teachings throughout the different childhood stages:

Early Childhood – According to T. Rowe Price’s 2021 “Parents, Kids, & Money Survey, 56% of parents don’t have a conversation with their kids about finances because they believe they are too young to understand. A child’s ability to learn to control their impulses arrives as early as age three. This impulse control carries over to financial habits since so much of our discretionary spending are impulse purchases. Young kids learn through playing and observing, so the best way to teach young one’s how money works is to use your imagination.

Middle Childhood – In middle childhood, kids have the mental capacity to set long term goals and develop a plan, with guidance, to achieve those goals. In this stage, letting kids do some extra chores around the house sets the guidance that you earn money by working and you must earn money before you can use it. One big setback at this stage is kids begin to compare material items against each other and begin to realize that not all kids have to work for their spending money.

Late Childhood – Older kids develop critical thinking skills that aid in smart financial decision making. At this point in childhood, they have a sense of what they want to achieve for their own personal goals and can make decisions effectively to accomplish said goals. If you feel your child is responsible, and has met the minimum age requirement, think about adding them as an authorized user to your credit card. This helps establish credit history, while teaching them how the credit card works.

As your child grows and shows an interest in money, don’t shy away from the conversation. Instead, dive right in and talk about money at their level, whether that’s pretend play, coming up with chores for them to complete for money, or adding them to your credit card.