What is the best age to teach children how to manage their finances? As you can expect, there is wide speculation on the answer. This may well be because of our tendency as adults to reflect on our personal youth experience. Or it could be a parental desire to think of children as children forever.

Financial literacy is undoubtedly one of the key skill sets that every one should learn and the earlier, the better!

Worldwide, just 1-in-3 adults show an understanding of basic financial concepts

S&P Global Financial Survey

When I was seven years old, my dad gave me and my older siblings a weekly allowance. Greatest highlight of my weekend! As though it was burning a hole in my hand, I accompanied my siblings to the local shop. We purchased snacks and devoured them before the weekend was over. During the week if I asked for a snack, my dad would remind me that I get a weekly allowance and if I wanted a snack in the week, then I should save some of my allowance to spend during the week, (or I should save one of my snacks for that purpose). Either way, my dad was underscoring the principal of budgeting.

Unfortunately my dad lost his job a year later. The practice of a weekly allowance was stopped and never reinstated.

I went through high school and college without learning anything else about financial management. But the principal of budgeting was well-entrenched and made a great starting point.

Why children need to learn how to manage their finances

Like most other life lessons, adult behavior shapes the views children have about money. If the conversations around money dwell on the negative aspects and don’t enforce the principals of saving, addressing needs before wants and giving, then children grow up unprepared and could take longer to achieve economic success.

Whether we have the conversations with them or not, children understand that parents go to work to make money that provides their food, shelter and clothing. When there is no money, then the family does without certain things, whether deemed essential or not. We did without quite a few things when I was growing up. But it seemed like we always had the important things.

My mother never seemed to have a view on how to teach children to manage their finances, but she definitely had an opinion on adult-children spending. She sat me down on the day I announced that I got a job, asked me how much my salary was going to be and told me how to spend it! Way to go mom!

Again, whether we have the conversations with them or not, children will grow up. Some will have to figure out how to pay for college. All will need to earn a living. They will need provide for themselves and their family. Many of the things they see and associate with money today, they will experience for themselves. Their approach to dealing with these situations is best learnt and enforced through their academic development.

So what is the right age…?

Our efforts to teach children how to manage their finances, should begin at the age when they are developing their comprehensive skills. In many schools, this occurs at the age of seven. When they can put together a sentence which explains an incident and why it happened, they are ready to appreciate the value and purpose of money.

We appreciate that the children develop at different rates. Pay attention to the types of questions your children ask and the answers they give when asked a question. If they are inquisitive and provide analytic responses, its definitely time!

Key benefits of teaching children to manage their finances

#1 When you teach children to manage their finances they experience Brighter Futures through Financial Security

When we invest in the education of our children, particularly their financial education, they develop a mindset that empowers their ability to generate wealth. Wealth in this case refers to the ability to generate multiple streams of income to support a desired lifestyle. Their ability to understand how money flows throughout the economy and how to use financial systems to fuel sustainable growth builds a secure future.

#2 When you teach children to manage their finances they demonstrate: More Effective Engagement in Sustainable Economic Development

Financial literacy incorporates several valuable disciplines. Children learn the power of earning and the value of giving. Their sense of entitlement is curbed by their desire to contribute. Their curiosity and creative senses are sharpened and they develop empathy skills.

Where do you start?

A great place to start, when you decide to teach children to manage their finances is budgeting or saving. Many people influence the lives of our children and can play a role in teaching them to manage their finances.

Simple conversations around what they can buy, how they can save to buy the things they “want” while you provide the things they “need” help. Even though piggy banks have migrated from pigs to iconic shapes and more, creating a homemade “bank” is quite appropriate to enforce the value of saving.