It’s never too early to introduce financial literacy in an age-appropriate way.francescoridolfi.com/iStockPhoto / Getty Images
I manage the finances in our household and consider myself to be quite financially literate, stemming from when I read my mom’s weathered copy of The Wealthy Barber as a teenager. Obviously, I want my own kids to be financially literate, too.
But my daughters are only two and four, and I struggle with how and when to introduce them to the concept of money.
For help I turned to Robin Taub, an accountant by trade and the author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life. The book covers five pillars – earn, save, spend, share and invest – and how to broach these topics at different ages and stages.
Ms. Taub believes it’s never too early to introduce these ideas in an age-appropriate way, although she recommends starting to actively have these conversations around age five.
When it comes to my children’s financial futures, I’m turning to a secret weapon: time
“Raising money-smart kids has never been easy, but it’s even harder in today’s financially complex, sophisticated world,” she said.
“We live in a digital world where cash is disappearing and bitcoin dominates the headlines, where spending has become frictionless but saving is still hard, where fraud and scams are constant threats and it’s hard to keep up with the latest tools and apps.”
So in that increasingly online, nuanced world, how do you teach a four-year-old about money? Ms. Taub encourages busy parents to use moments that crop up naturally in their day-to-day lives as teachable moments – as opposed to sitting down for specific money lessons.
For example, she suggests using a trip to the grocery store as a way to highlight the difference between needs, such as milk, eggs and bread, and wants – popsicles and treats, for instance. (Highlighting the difference between needs and wants can be especially helpful for a toddler who insists they need yet another Paw Patrol toy.)
Ms. Taub said letting kids get involved in transactions can also be a teachable moment. That could look like allowing them to hand over money at the store and accept the change from the cashier. Since I rarely use cash, I often play coffee shop with our girls, where we mimic handing over cash and giving back change.
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Our girls also received a piggy bank from their aunt for Christmas, with a shiny $20 bill to put inside. We’ve used that to start conversations about saving: If they ask to get another toy, we point to the money that’s in their piggy bank. Ms. Taub says a piggy bank with separate compartments can be useful, so kids can allocate money into saving, spending, donating and investing compartments.
These tactile moments are few and far between in a cashless world. I find that tapping my phone to pay or paying bills from my phone, rather than visiting the bank, makes many day-to-day financial tasks intangible for a young child.
As kids get a bit older, you can start to introduce them to more complex topics such as digital payments. In the meantime, Ms. Taub suggests giving them opportunities to earn money through chores or an allowance, for instance, and make decisions about how they use it.
“With an allowance, they get to have that feeling of making choices with a scarce resource, and knowing what it feels like when you spend your money on something that, in the end, didn’t feel like it was worth it,” Ms. Taub says.
While our own kids are still a bit young for an allowance, we’ve tried to teach them about scarcity by going to the dollar store and giving them a “budget” of two items.
Finally, Ms. Taub says that the best way to teach your kids about money is to be a good role model yourself, and to lead by example so they absorb lessons through osmosis.
My kids aren’t yet ready to grasp concepts such as credit, Apple Pay and compound interest. In the meantime, I’m just trying to demonstrate good habits, talk about money when and where I can, and most importantly, model gratitude for what we have and the importance of giving back.
“They are watching and listening and learning from us and the way we behave around money,” Ms. Taub says. “So it’s not always what we say. Often, it’s what we do.”
Erin Bury is the co-founder and CEO of online estate planning platform Willful.co. She lives in rural Ontario with her husband and two young children.