STILLWATER, Okla. – Financial security is a life goal for everyone, and building the skills to achieve that goal starts at an early age.
Learning money management skills early in life will help children develop good habits, said Mengya Wang, Oklahoma State University Extension finance specialist.
“Children start to develop financial attitude at 5 to 6 years old,” Wang said. “This is why parents need to model good financial habits. Just like teaching our children good habits, such as brushing their teeth and doing their homework, we also need to teach them about money.”
Children know what money is from an early age because they see their parents paying for groceries, restaurant meals, gas, clothing and more. What they don’t have a firm grasp on is where the money comes from.
Wang said parents need to explain to children the concept of going to work and being paid for the work. Help them understand that money does not simply appear.
“It’s vital for children to learn that people have to work for money. Adults go to work to earn a paycheck to pay for living expenses, cars and vacations,” she said. “Children can earn money for things they want, too. Establish chores around the house and pay children an allowance for completing the chores. When children understand they must work for money, it incentivizes them to spend wisely.”
Helping children understand the difference between a need and a want is another important lesson. One way to help them learn is by letting them assist with meal planning and grocery shopping. Set a limit for the shopping trip and stay within budget. Leftover funds can be set aside for something later, such as a trip to the swimming pool or the movies.
Just as spending wisely is important, so is saving. Children need to learn about short- and long-term savings goals.
“A long-term goal may be a new bicycle. If a child receives money as a gift, encourage them to save half or more to put toward their goal. Or they can sell their old bike and use that money toward a new one,” Wang said. “Making money decisions is about making choices. By saving money now, that puts them closer to their goal.”
As children become teenagers, parents can start introducing concepts regarding interest rates, investing and even retirement accounts. Show them that the earlier they start saving, the more money they’ll have later on.
“Being financially responsible is one of the biggest lessons parents can teach their children. Parents must model the skills they want their children to learn,” Wang said. “Children learn what they are shown, and financial responsibility will help them greatly throughout their lives.”
OSU Extension uses research- based information to help all Oklahomans solve local issues and concerns, promote leadership and manage resources wisely throughout the state's 77 counties. Most information is available at little to no cost.
