In a world where Fortnite's V-bucks, in-app purchases and Alexa direct ordering is very prevalent, the world of money and access to spending has rapidly bypassed parents and landed in the lap of our elementary school kids!
In fact, I’m sure you or someone you know has been surprised to see a charge on a bill that was made by a little one.
So, if our kids can virtually buy things with real money, shouldn't they know money management for real?
As an expert in financial literacy, I often get asked by parents what the correct age is for kids to start learning about money, and this is always my reply: "teach children about money, before you give them access to spend it".
If your 6 year old has access to play Fortnite, control your Alexa, or hop on a family iPad, then empower them to use the real-life skills of how to budget and manage what they’re spending.
What money lessons can a young child learn?
The answer is plenty!
Here is some of my top financial advice for parents:
1) It's ok to talk about money. The most basic lesson we can teach our kids is that money is not a "taboo" subject. Many of us were raised in societies where money was never spoken about or was considered too "uncultured" to talk about, but this can lead to us as adults never really being able to be comfortable with our finances.
The easiest way to remove the mental block we often have about money is to normalize it and have those conversations with our children early on.
For example, if your child asks for an ice cream, try putting it into perspective by showing them that this ice cream is equivalent to 10 minutes of you working at your job. For younger kids, use these concepts of math and money but amp up the practical creativity to make it a fun, interactive activity! Perhaps take them for a walk for 10 minutes so they can understand and appreciate the time and effort that goes into making money for their ice cream.
2) Gamify the concept of credit and debt: By simply changing the words around, a child as young as 6 knows intrinsically what these concepts mean. When kids play video games, they are used to losing and gaining “lifes”. If you apply this concept into credit and debt, it's easy to make the lesson more engaging and easier to understand.
For example, if your child helps you unload the dishwasher, they win some credit. If they don’t make their bed, they lose a credit. When they lose enough of their credits, they end up in a debt situation and need to work to get out of it. The easiest way to teach a child about money is to make it into a game.
3) Set up strong financial habits from the beginning: It’s never too early for a child to go to the bank and deposit their money–even at age 6! It teaches them not only how to bank, but also normalizes banking and finance so it doesn’t become a big, scary concept for them.
By giving a child money and letting them spend all of it, we send the message that saving is not important.
When we force our children to save but do not allow them to spend, we are telling them money is only for hoarding, not for enjoying. A better way would be to let kids figure out for themselves how much they want to save, how much they want to spend and how much they want to give to charity.
Keeping kids in charge of their own money right from the start gives them a feeling of empowerment.. And don't worry if your child decides to spend all of their money the first time, they will soon learn they don’t have any money left!
4) Help them set goals and show them how to track them: Children, just like adults, work better and stay focused with they have a goal. Let's say your child wants to buy a new pair of headphones–this is their goal and they’ll put everything they have towards it.
You can help them by setting up a tracking mechanism. For example, when they hit the halfway mark they, get a sticker, or a balloon when they are the 3/4 mark. The trick is to avoid adding money for the sake of making them reach their goal faster.
The longer it takes them to reach that goal, the more they will understand their need for this item and how they can set financial priorities in the future.
5) Teach them about Investing at a young age. Like budgeting and spending money, it’s never too early to teach our kids about investing and the stock market. Once they understand it, the rest of the market forces, such as news, product demand and how the world around them is connected, will make more sense.
The earlier they learn how to invest and follow companies, the better they will be prepared for life.
Ready to get your child ahead in money management? Sign them up for our innovative Camp Millionaire after-school program or summer camp that will teach them financial literacy in a fun, stress-free learning environment.