What’s an appropriate age to begin educating a child about finances?

[iNow]

What’s an appropriate age to begin educating a child about finances?

So many of us as we mature look back and think, “gosh, if only someone had mentioned that” or “if only I’d known that sooner, imagine what I could’ve done differently.”

In financial terms, examples include:

- Save 20% of every paycheck

- Compound interest is one of the most powerful wealth generation tools available. Summarized: The sooner you start the better

- Maximize 401k contributions

- A company match on retirement savings is basically free money

- Getting the lowest possible interest rates will allow you to both pay off the loan sooner and make smaller monthly payments until you do 

- Pay off the highest interest debt first, and always prioritize debt payoff if your savings earn a lower interest than the debt interest you’re paying... earning 2% on savings is a net 3% loss if you’re paying 5% on debt of the same amount (see also, point #1)

- Etc...

There are countless foundational finance basics like this out there and countless times I’d wished someone had introduced me to them sooner. 

The question then is: how soon is appropriate to introduce them to a developing human? What’s an appropriate age to begin educating a child about finances?

I’m thinking maybe 5, but TBH feel that’s perhaps a bit ridiculous since most 5 year olds don’t even tend to know basic math yet. 

What say you?

[Prometheus]

I think learning by play is the way to go: something like Machi Koro - resource (money) optimisation, simple risk vs benefit decisions, investing and planning for the future and cardboard coins. Played it with 8 year olds before, they were able to understand some of their more stupid mistakes by themselves. 5 might be too young but better than giving them an abstract list. I'm sure there are simpler games out there suitable for 5 year olds which still cover some very basic concepts.

[YaDinghus]

On 5/29/2018 at 11:30 PM, iNow said:

What’s an appropriate age to begin educating a child about finances?

So many of us as we mature look back and think, “gosh, if only someone had mentioned that” or “if only I’d known that sooner, imagine what I could’ve done differently.”

In financial terms, examples include:

- Save 20% of every paycheck

- Compound interest is one of the most powerful wealth generation tools available. Summarized: The sooner you start the better

- Maximize 401k contributions

- A company match on retirement savings is basically free money

- Getting the lowest possible interest rates will allow you to both pay off the loan sooner and make smaller monthly payments until you do 

- Pay off the highest interest debt first, and always prioritize debt payoff if your savings earn a lower interest than the debt interest you’re paying... earning 2% on savings is a net 3% loss if you’re paying 5% on debt of the same amount (see also, point #1)

- Etc...

There are countless foundational finance basics like this out there and countless times I’d wished someone had introduced me to them sooner. 

The question then is: how soon is appropriate to introduce them to a developing human? What’s an appropriate age to begin educating a child about finances?

I’m thinking maybe 5, but TBH feel that’s perhaps a bit ridiculous since most 5 year olds don’t even tend to know basic math yet. 

What say you?

 

On 5/29/2018 at 11:41 PM, Prometheus said:

I think learning by play is the way to go: something like Machi Koro - resource (money) optimisation, simple risk vs benefit decisions, investing and planning for the future and cardboard coins. Played it with 8 year olds before, they were able to understand some of their more stupid mistakes by themselves. 5 might be too young but better than giving them an abstract list. I'm sure there are simpler games out there suitable for 5 year olds which still cover some very basic concepts.

Now this comes from personal experience so CAVEAT but I figured the rules out by myself by like the age of 10, but I didn't start following them until I was in my 30's, mostly because I didn't learn to value money as a kid. Money just came out of the faucet so to say until I finished college at 27 and then I suddenly had to work for my money. Figuring out the principles was easy; training myself in discipline to be able to follow these principles was the hard part

[Prometheus]

10 minutes ago, YaDinghus said:

Now this comes from personal experience so CAVEAT but I figured the rules out by myself by like the age of 10, but I didn't start following them until I was in my 30's, mostly because I didn't learn to value money as a kid. Money just came out of the faucet so to say until I finished college at 27 and then I suddenly had to work for my money. Figuring out the principles was easy; training myself in discipline to be able to follow these principles was the hard part

The rules to Machi Koro, or the rules to personal finance?

Personal experience is relevant here because that's generally how we learn to manage our finances. That's why i think games would be useful - they give experience in managing resources. I think games could help with the discipline part too: saving for a large capital investment that itself will give possibly give a large but delayed return. You also get to see how often high risk strategies fail. Stuff like that. 

[YaDinghus]

4 minutes ago, Prometheus said:

The rules to Machi Koro, or the rules to personal finance?

Personal experience is relevant here because that's generally how we learn to manage our finances. That's why i think games would be useful - they give experience in managing resources. I think games could help with the discipline part too: saving for a large capital investment that itself will give possibly give a large but delayed return. You also get to see how often high risk strategies fail. Stuff like that. 

I should have been specific that I meant the rules of basic finance. And you are right that you can learn a lot from games. Edutainment has been an emerging branch of game design for the better part of the past decade

[John Cuthber]

You start to teach kids the fundamentals of finance when you say to a 2 year old that their food is "all gone".

[studiot]

18 minutes ago, John Cuthber said:

You start to teach kids the fundamentals of finance when you say to a 2 year old that their food is "all gone".

Yup you should start to teach them 'value' +1

[Sensei]

On 29.05.2018 at 11:30 PM, iNow said:

What’s an appropriate age to begin educating a child about finances?

Never. So they won't even know what is money.. So they won't do anything for money... Won't steal for money.. Won't kill for money.. Won't hurt other people (or other living organisms, or natural environment) for money.. Instead do things when they are simply needed to be done..

(repeat couple generations) and you won't have greediness, thieves, poorness, richness.. etc. etc.

There is needed absolute awareness of such children e.g. they have to know entire quantum physics, and the entire science..

 

[iNow]

Children learn things about this world just by existing in it even if parents aren’t the teacher.

Your idealism and ideas for achieving it is interesting, but are not what I’m interested in discussing here. 

[MigL]

I don't have kids, so I can't really help you.
My  parents were immigrants, so I was brought up fairly frugal.
If I could go back and give my younger self financial advice it would be...
"Spend your money now, it'll never be worth more than it is right now."

Oh, and...
"Spend it on real estate."

[zapatos]

I taught my kids about sex and money in the same way and about the same time. I used every day examples to educate them, talking at the level they would understand. Most lessons were short and sweet, but it also gave them the opportunity to ask questions. I also felt that if they asked a question, then I should answer it, no matter what it was.

When I would get cash at an ATM I would tell them how when I went to work my boss gave me money (which was just a bunch of numbers), then at the ATM if I showed them my card they would give me some money and take away some of my numbers. Buying a sandwich for a guy outside the Subway shop was a good way to talk about charity.

I also asked them a lot of questions. Would you loan your friend Tony some money? Why not? What if he promised to give you twice as much back? Now risk and reward is covered.

Same similar lessons on credit cards, loans, paying bills, retirement, etc. Kids are exposed to financial situations every day so it is easy to start the conversation.

I skipped the age old lesson we're always told do with kids, about having them save 20% of their allowance, give 10% to charity, etc. I found it to be contrived.

EDIT: My parents did no prepare me for how the financial world works (or sex for that matter). I read a book called Making the Most of Your Money by Jane Bryant Quinn. It is comprehensive and made a huge difference for me. Both my boys received a copy at the appropriate time.

https://www.amazon.com/Making-Most-Money-Bryant-Quinn/dp/0684811766

Edited June 6, 2018 by zapatos

[iNow]

35 minutes ago, zapatos said:

Kids are exposed to financial situations every day so it is easy to start the conversation.

Helpful post, and I like your approach. Thx. My instincts suggest that when you began they were someehere around the 7 or 8 year old mark also referenced above by Prometheus?

[zapatos]

58 minutes ago, iNow said:

Helpful post, and I like your approach. Thx. My instincts suggest that when you began they were someehere around the 7 or 8 year old mark also referenced above by Prometheus?

Oh yeah, that was your actual question, wasn't it. 

Yes, that was about the age. However, you don't have to worry about starting too soon because the lessons are short and if they aren't ready for it, they'll simply give you a blank stare then ask if they can have a giraffe.

[Bender]

Teach by example. Be responsible with your money and occasionally explain your behaviour. There is no age limit.

The details about economics, taxes, stocks etc are simply not relevant until late adolescent. (Besides, it is quite possible our current economic model, which is already horribly outdated, won't survive the next 20 years.)

The most important lesson about money to teach by example : never compare your wealth to that of others. Never make envious remarks about those that are more wealthy and never make degrading remarks about those with less wealth.

Edited June 10, 2018 by Bender

[iNow]

Great points. Thx, Bender