Teaching kids about money
Teaching your kids about money to help them understand the value of delaying gratification and saving will establish the foundations for a financially fit future.
How many of us look back on our childhood and wish we had been taught more about money? Why not help your kids avoid making the same mistakes you did?
1. When should you begin teaching kids about money
How do children develop money habits and when should you start teaching them about money?
Beth Kobliner, author of the New York Times bestseller Get a Financial Life, advises that to ensure the next generation live financially fit lives they need to be taught the essentials of money management.
She explains that children as young as 3 can grasp financial concepts like saving and spending. So it’s important to start early because by age 7 children will have already formed their money habits.
2. The most important money lessons
Forbes senior editor, Laura Shin unpacks a number of early-development money skills based on advice from Beth Kobliner. Here are some of her key insights:
- This is one of the toughest lessons for people of any age to learn and it’s a great place to start with your kids. “The ability to delay gratification can also predict how successful one will be as a grown-up,” Shin says.
- Kids aged between 3 and 5 are able to learn that if they really want something, they should save to buy it. Money lessons at this age set the tone for later on. “You really can’t start too early,” Kobliner adds.
- Speaking about her personal experience, Kobliner explains: “When we go into a store, if I say, ‘We don’t have money for this,’ they’re smart — they know we have credit cards,” So, Kobliner would say, “We’re here to buy a gift for X, and we’re not going to buy anything for you, because we’re not here for that.” Kids then quickly learn that going into a store doesn’t always mean you’ll buy something for them.
The research on delaying gratification
The Stanford Marshmallow Experiment studied a group of children aged between 4 and 6, who were given a marshmallow and left in a room for 15 minutes. “They were given the choice of being able to eat the marshmallow now, or if they were to wait the 15 minutes, they would be able to have two marshmallows. Ultimately, some children were able to wait, while others were not,” Baker explains.
The Stanford researchers continued to study the development of these children into adolescence and found that those who delayed their ‘marshmallow’ gratification were:
- Psychologically better adjusted
- More dependable
- Scoring significantly better marks than their peers
“With the latest study conducted on these exact same participants in 2011, the research shows that these characteristics have remained with the kids into adulthood,” Baker says. “Delaying gratification improves willpower and ultimately helps people reach longer-term goals faster.”