Introducing kids to money management at an early age can set them on a path to financial success. By ages 6-7, children begin to understand the value of money and how it’s earned, spent, and saved. This stage provides a perfect opportunity to teach foundational skills through everyday experiences and playful activities. By guiding them through simple financial concepts like saving for a goal or making smart spending choices, parents can instill lifelong habits that will benefit their children as they grow.
Understanding That Money is Earned
One of the first and most essential lessons is teaching children that money doesn’t come from just anywhere—it is earned through work. This age group is curious and eager to learn, making it a great time to show them how money is exchanged for goods and services. You can reinforce this by:
- Explaining that people work to earn money and use it to buy things.
- Letting kids observe you paying for groceries, clothes, or toys with cash so they can see the direct connection between work and money.
During playtime, you can also incorporate fun, educational activities like setting up a pretend store where children can act as both the buyer and seller. This allows them to practice counting money and making purchases while reinforcing the concept that money is earned and has value.
Practice Handling Money in Play
At this stage, cash is an effective tool for hands-on learning. Activities that involve counting and exchanging money help sharpen kids’ math skills while introducing them to real-life financial situations. Here are a few engaging ways to practice:
- Board games like ‘Monopoly Junior’ can teach the basics of handling money.
-Pretend play with a toy cash register, play coins, and plastic cards helps familiarize them with financial tools.
- Rolling coins together and depositing them at a bank shows the process of saving and using money.
These fun activities create an interactive way for children to learn about the value of money while practicing essential math and counting skills.
Introduce Small Allowances
Once children reach 6 or 7, they’re ready to manage small amounts of money. You can introduce a small allowance to help them understand the basics of budgeting and financial decision-making. You may decide whether or not to tie the allowance to household chores—this is a personal choice.
When introducing an allowance:
- Start with a small, consistent weekly amount paid in cash.
- Encourage children to manage their allowance for small purchases, teaching them the value of saving.
- If they run out of money, reinforce that they can’t buy everything they want, introducing delayed gratification.
Setting clear guidelines for spending and saving will help children make more thoughtful financial decisions and teach them that money isn’t unlimited.
Encouraging Smart Spending and Saving Habits
Now that your child is starting to make small purchases, it’s crucial to introduce the concept of making smart choices. You can encourage saving for special items by setting aside a portion of their allowance each week in a designated savings jar. You can also:
- Allow them to pay for their own items at the store, helping them count money and get change.
- Supervise their spending decisions, setting limits on what they can buy and how often.
- Encourage saving for specific goals, such as a birthday gift or a toy.
This way, they can experience the satisfaction of reaching a financial goal while learning the importance of patience and planning.
Introduce Basic Banking Concepts
As children approach the age of 7, they can begin learning simple banking concepts, which will prepare them for more advanced financial learning in the future. You can explain:
- How a paycheck gets deposited in the bank and is used for everyday purchases.
- How ATMs work, dispelling the common belief that they give out unlimited money.
- How saving at a bank is safe and grows over time, introducing the idea of interest in a simplified way.
Bringing kids to the bank for basic tasks like depositing coins or using an ATM is an excellent way to demystify banking and help them feel more connected to financial responsibilities.
Build a Healthy Relationship with Money
At this age, children are paying more attention to how you, as a parent, talk about money and make financial choices. It’s important to create a balanced and healthy environment where they can learn responsible money habits. Be mindful of how you:
- Discuss work and earning money in a positive light.
- Talk about your purchases, distinguishing between wants and needs.
- Model good financial behaviour, such as sticking to a budget or saving for large purchases.
Your children will pick up on these cues and learn to make thoughtful, balanced financial decisions.
The Growing Role of Digital Finances
Children today are growing up in an increasingly cashless society, so it’s essential to introduce them to digital finance concepts early. You can explain how digital payments work in simple terms, such as:
- How is your card or phone linked to money in the bank?
- How money moves from your employer to your bank, and then to the store when you make a purchase.
Using online games or apps designed for financial education can also reinforce these concepts, as long as in-app purchases are disabled. This early exposure helps kids understand that even though digital payments aren’t as visible, they’re still real transactions that require careful budgeting.
Building Money Sense
By teaching these key money basics early on, you set the stage for your children to become financially savvy adults who understand the value of earning, saving, and spending wisely. This is a time when learning about money can be fun, engaging, and rewarding, establishing lifelong habits for financial success.
Also Read: Understanding Fiat Money: Definition, Benefits, and Economic Effects
