8/9/2013 2:15 PM ET|
Many money habits are set by age 7
Surprising new research finds that when it comes to teaching about spending and saving, you really can’t start too soon.
A growing body of evidence tells us financial literacy education doesn't work, at least not as it's currently taught. Perhaps one reason is that we're not starting early enough. We should begin before the kids are in kindergarten.
You might think that's a stretch, given that many preschoolers are still grappling with the notion that a nickel isn't worth more than a dime, even though it's bigger. But British researchers now are telling us that our approach to money is basically set by age 7.
Behavior experts David Whitebread and Sue Bingham of the University of Cambridge reviewed previous studies to determine how children learn in general, and how they learn about money in particular. They concluded that money habits -- including the ability to plan ahead and to delay gratification -- are typically formed early in childhood.
"The window is zero to 7," said Guy Shone, research director for the British government's Money Advice Service, which published the study. "It's very hard to reverse those habits later in life."
What if we missed that window? Are our kids doomed to a life of debt, manipulation by advertisers and various scams they won't see coming?
Not at all. Change may be hard, but it's possible.
Still, the study reminds us that we need to start teaching good money habits as soon as our kids understand that money is used to buy things.
"Parents as a group typically don't feel particularly comfortable talking to kids about money," said Shone, the father of a 2-year-old. "At the same time, we know there's a huge effect we have. . . . We underestimate how powerful we are as parents."
Parents who are trying to teach older kids should expect that their job may be harder, said financial literacy advocate Susan Beacham, since they're changing mindsets rather than shaping them.
Those with younger kids should take advantage of their opportunity to reach children "at an age when they . . . still think we are geniuses," Beacham said.
The simple act of grocery shopping with a list can help teach the importance of planning ahead and "shopping systematically" rather than "just grabbing things off the shelf," said Nancy Baynes, a spokeswoman for the Money Advice Center.
Even better is involving your kids with lots of hands-on experiences, which will teach them far more than lectures. Among the things we can do:
Require them to save. Young children save because they enjoy participating in adult-like behavior, the researchers found. Inculcating the savings habit when kids are small -- something financial literacy researcher Lewis Mandell calls "indoctrination"-- may be the best approach if you want your kids to be savers as adults. Requiring children to put aside a portion of every dollar they receive or earn can help develop the habit.
Let them make purchases -- and mistakes. The idea that money is a limited resource -- that it must be given up in a transaction and can only be spent once -- is one that young children struggle to understand. Parents can reinforce the concept of exchange by giving children a small amount of money to spend in a store -- and then not shelling out if the child is later disappointed in the purchase, or wants more.
Let them earn. Kids need to know that we can't afford to buy everything we want and that what we can afford is determined by our incomes. Talking about various jobs and their salaries is one way to teach this idea, as is paying children to take on extra chores around the house so that they understand they're trading time and effort for money.
Make delayed gratification easier. Help your children set goals, such as saving up money to buy a toy or a game. A chart that tracks their progress can keep them interested and engaged in achieving the goal. Teach them strategies to make waiting easier. If children are tempted to spend money rather than save for their goal, you can distract them from the latest shiny object by helping them plan a fun alternative (going on a bike ride, making a craft from items already on hand) to help them resist giving in to the impulse.
Take them grocery shopping. Being involved in decision-making can help kids understand the trade-offs required in economic transactions, which can make it easier for them to delay gratification. A child might help a parent compile a shopping list, since lists help people prioritize what they need most in contrast to all the things they might want. Parents can discuss sale items, which sizes are most economical and how they make decisions in the store.
"Just talking to your kids about what you're doing, what you're thinking, your decision-making process, can be really powerful," Shone said. "You never know specifically what message is landing, but by doing that regularly and repeatedly . . . it becomes part of how the child sees the world."
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Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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As I've been telling my kid from age 1...gotta save money to have money.
No school taught me that, I learned that from my mom.
It's interesting that the ideas above are simple common sense. When I was growing up in the 1950s and 1960s, my parents were never afraid to say we couldn't afford something I wanted, or to tell me I had to save for something special - or even wait until my birthday or Christmas.
Back in those days, banks offered Christmas clubs, where you paid a certain amount of money into the account every week, then got a check after Thanksgiving. My mother had one ever year, and my siblings and I each had our own. We had to put money from our allowance into the account when we went to the bank each week. This was long before the days of credit cards. So we learned early on the value of saving money.
Sadly, since credit cards became available to almost everyone in the early 1980s, people have lost the concept of saving, and have been sucked into the idea of charging what you want now, and paying for it forever. It's no wonder so many people can't pay their bills.
Kids older than three should be taught early math, early alphabet, early reading, early
cooperation (government), and above all else, manners and consideration for
themselves, parents, adults and all others. That should include computer savvy,
but it doesn't infer that learning be restricted to a classroom, computer or a teacher's
presence. All advanced global cultures rely upon language, social cohesion and
budgetary concepts for survival. Reading and math are absolute minimals for
survival in the modern world. Obtaining toys beyond age three without grasping the
realities for needed shelter, health care, food harvesting, transportation, planning
and reserve-funding principles only instills empty negative consumption precedents.
Having children witness parental budgeting and planning activities are vital acts of
which kids should be crucially aware. Though 'budgeting' is an intangible concept,
writing mortgage checks, paying in cash, estimating water-utility-insurance bills are
tangible physical acts to pre-designated funds that are being accumulated/accrued.
Grocery shopping is concrete; menu listing and paring potatoes before cooking/eating
are concrete; filling the gas tank and getting dental treatments are likewise concrete
economic "pre" budgetary adult-household acts. Setting a TABLE, doing laundry are
concrete. Bathing routines are preparatory and must be planned and completed
prior to obtaining new toys. All those platforms must be in place before 'toys' can be
purchased and used. Toy acquisition is so far down the chain of 'musts' as to be
Many parents don't realize they're awfully inadequate to administer sufficient teaching
to rear progeny, hence the reason we have such 'scattered' spending patterns. When
parents haven't graduated from college (we learn to work/plan/wait/substitute during
that educational process), haven't established security in a career that will support the
family or ignored a stable in-place home environment, their offspring will certainly also
acquire a discounted lifestyle and less-than-par educational fundamentals. Junk in is
junk out, and junk doesn't evolve into quality when all it experiences is third-rate
assistance from elementary school dropouts, dysfunctional personalities or adults
who've jumped the gun and created offspring and obligations yet ignored requisites
of obtaining strong financial platforms. Unhealthy parents, neighborhoods or associates
only transfers like unhealthy values to youth. PREPARED ADULT PARENTS breed
PREPARED AWARE OFFSPRING.
I agree with Liz and this article. Children learn early; they observe and they listen to adult conversations about everything including money. I also believe children coming from poor backgrounds may be better with money than children from an affluent family.
During my childhood in the 40’s and 50’s, children did not receive an allowance or at least I didn’t. My stepfather was a janitor in an apartment building but he also worked another job. Most of the janitorial work fell on me from mowing grass, clipping hedges, cleaning doors and brass, shoveling coal for the furnace, filling trashcans with ashes from furnace and dragging 15 heavy metal trashcans to the curb every week. Never received a dime or thank you; it was expected.
During that period children from my background were not expected to go to college. That was for the upper middleclass that could afford such luxuries. I was also an immigrant that could not speak English at that time. At school, I had a difficult time as the only foreign student, and I had no idea what the teacher was saying. I just sat there listening. I did know that it was very important to learn the language as fast as possible and to assimilate. Some of the children, and even some adults are openly hostile to someone that cannot speak the language.
My very first experience of working for money came from a wealthy family that lived in a house and grounds covering half a city block. I was asked to mow all the grass (push hand mower) and trim all the bushes, weed the flowerbeds, rake and cleanup. I was 14, and a meticulous hard worker. It took two full days to complete this job. I was proud…the place looked fantastic. The owner came out, said beautiful, and handed me a $1.00 bill. While I was working I imagined receiving as much as $5, or since they are rich even $10
Lesson learned, learn the language, people will take advantage of your ignorance especially rich people. I assumed that is the reason they are rich. I said no to the offer of working for them again.
Fast forward, I could never afford college but by joining the military one had the opportunity. I would never again be looked down on; it took much practice to speak English without an accent. Money is acceptance and respect and I would have both. I also learned that people that only work hard usually would always have to work hard. People that make their money work hard are in a much better position.
A few years ago, Liz used me as one example for her articles about the secret millionaires next door.
My daughter and I read a book called "Pretty Penny Sets Up Shop." She learned the money plan: Save Some, Share Some and Spend Some.
She earns money for doing extra academic work at home. She was very proud to count out $20 to buy her walkie-talkies. She donated $3 to St. Jude and put $2 in church. And she put $4 in her bank account.
While these are not large amounts of money, for a 5 year old who worked and saved, they were huge stepping stones.
Thank you to the cashier and bank teller who waited patiently while she counted all her ones!
I think that there is some truth to the concept.
Realizing that if your dad gives you 20 cents you can only spend that much, and the variety of sweets and toys you can buy are priceless concepts formed early in life.
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