In this blog I go through the different money topics I feel parents should be teaching their kids at different, indicative only, ages.
Note: All links in blue open in separate tabs so you can read later
These topics don’t just cover the basics of money, i.e. save to spend later, they focus on training your kids to become wealthy by following the 'Three Rules of Wealth'.
Most people don’t think about building wealth until much later in life and miss out on decades of compound interest working in their favour. Also, by teaching kids about becoming wealthy, from a young age, they are more likely to look after their money, i.e. spend less on things they don’t really need, especially on things to keep up with the Jones’.
The added bonus is that by teaching your kids about money, it can increase your chances of being wealthy too ... find out how here.
Aged 4 and below
Being good with money is more about behaviours (temperament) than knowledge. So training your toddlers to have the behaviours which are aligned to being great with money is not a bad idea.
Patience - This is the super power of those who are good with money. You can train your kids from a very early age to be patient. The key is to keep it small and reward them when they are patient. This could be getting them to save the last piece of chocolate for the next day and giving them something extra as a reward (the next day). Read them the 'Rock and Hammer Story' before they go to bed one night so they learn about patience.
Budgeting - I’m not talking about budgeting their money here. I’m talking about budgeting how much TV they have or how many treat snacks they get. Maybe give them TV tokens at the start of the week and get them to decide when to use them. For example, they could decide to watch a small bit of TV each day or to watch more one day and none the next. They will soon work out not to use all their tokens too early. It is important for parents not to give bonus tokens if your kid does spend all their tokens too early. This might be hard but it will pay dividends over the long-term.
Play Shop - Kids love playing shop so you should encourage them. It helps them to understand money. Where possible, highlight how good it is to be the shopkeeper (who gets the money) rather than the shopper (who is giving their money away).
Recommended Book: Save Your Acorns by Robert Gardner
Recommended Game: Shopping List (Orchard Toys)
Aged 4-7 (SUPER IMPORTANT AGE!!)
Research shows that we form many of our adult money habits by age 7. Therefore, this age is really important as we are helping our kids form brand new habits. After age 7, we have to re-program habits they have picked up which is harder.
Money like seeds - Introduce the concept of money being like seeds. They can give those seeds away (spend) or plant them (save / invest). This teaches them that money isn’t just for spending. Their job is to make sure they plant some of their seeds (money) so they grow a forest over time. If they start planting a forest now, they will be well ahead when they are adults, especially as most adults don’t have any trees (savings). The best ways to get your kids excited about this analogy is to read them the book 'Grandpa's Fortune Fables'
Save before they spend habit - This is one of the most important habits for them to develop. Encourage your kids to save at least 10% of their money for the long-term (growing their forest) before they go out spending. They need to be doing this every time they receive some money (pocket money, tooth fairy, birthdays etc) so it becomes a habit. When they grow up and earn more, they will save more. This habit is the best defence against the billions that is spent by companies trying to get us to spend our money. Here is a story you can tell your kids so they can see why it’s so important.
Saving up for toys - Instead of buying them toys during the year (apart from on their Birthday, Christmas/special holidays celebrated by your family), give them pocket money and say this is for them to buy their own toys over the year. This helps them learn to budget, consider what they really want, understand the value of things, make spending mistakes (my daughter spent weeks saving up for a dragon toy and then hardly played with it as it wasn’t as good as she thought!). I note that this should be separate from saving 10% for the long-term (growing their forest). Learn more about how to teach your kids to save money to spend later here.
Recommended Game: Monopoly Deal (My kids played this at age 5)
Aged 8 - 12
Continue to encourage your kids to follow the points raised above, especially in terms of being patient and forming the habit of saving before they spend.
Money can grow (Investing) - Teach your kids that money can grow. You can talk about putting money in a bank account but the real value is teaching them about investing. This is how the wealthy grow their money. If you need some tips on how to do this then please check out my most popular blog ‘How to teach kids about the Stock Market’ and set up an investment account by following our 10-year investment plan for kids. By doing teaching them how money can grow, you'll be giving your kids an massive advantage in life.
Earning money - Teach your kids that by working hard they can earn money. You can create an extra jobs list for them to earn extra money (gardening, washing the car etc) - remember, this shouldn’t be for general daily chores (making their beds, dishes etc). Rather than just making the link between working hard and money, try to introduce the concept of starting a business and working smart (e.g. a lemonade stand). You never know, your kids might have a hidden entrepreneurial talent. Why not get them starting one of these 5 business ideas for kids? Even if they don't want to become an entrepreneur, it's important kids learn to sell.
On the topic of earning money, here’s a story which many parents have said they’ve told their kids to teach them the difference between working hard and working smart to earn money.
Charity - Teaching kids that they can use money to help others can lead them to avoid focusing simply on what they have and what their friends (and people on social media) have. To learn more about charity and the positive impact it can have then please see this blog.
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Hopefully by this age your kids have started to form a good savings habit and thought about different ways to earn money. Now is the time for them to be aware of different money topics and taking on more financial responsibility. Especially as they will be facing more social pressure at this age and likely to be using social media (5 ways social media can stop your kids becoming wealthy)
Teach them about debt, tax, gambling and scams - These are really important topics which can really impact their lives and we need our kids to be aware of these topics before they first experience them as adults, especially with Buy Now, Pay Later companies targeting younger adults. Your kids won’t learn these in school (sadly) - therefore we as parents need to help them. If you are unsure how to talk to them about these topics then you can point your kids towards my ‘How to teach your kids about …’ series of blogs (the most popular is the 'Greater Fool Theory' blog) or sign them up to our online course which covers these topics (and more) in 5 short videos.
Give them a bank account - Giving your kids their own bank account and debit card is a great way for them to appreciate how to manage money themselves. This is a prime time to let them make money mistakes and, with your help, learn from these mistakes. Whilst we want to encourage them to do the right thing, we should ultimately let them decide. If they waste their money, so be it, this experience will stay with them and potentially avoid them making similar mistakes when they become adults which could instead cost them thousands.
Greater spending responsibilities - By the time they are 18, they will be responsible (I hope) for all their discretionary spending decisions. So, this stage of life is making sure you gradually transfer more spending responsibilities to them. Whilst you might still give them pocket money, this pocket money should now cover an increasing list of expenditures. For example, at 13 you might say their pocket money now covers going to the cinema (or equivalent) with their friends twice a month. Then it might increase to cover casual clothes and electronics. For more about how you can use pocket money to transfer spending responsibilities to your kids, see this blog here.
As they start to spend more, it's very important for them to understand that if they start buying some expensive things, it might lead to them spending a lot more in the future. This is a called the Diderot Effect. The other spending related topic to teach them is the difference between being Frugal and Cheap!
Wealthy Kids, not Rich Kids - With so much more freedom to make decisions, social pressure and ease at which they can spend money, it’s super important to remind our kids that they need to save some of their money so it can grow. It’s those that grow their money that go on to have financially healthy lives. Teach them that there are plenty of examples of people having lots of money (pop stars, sports stars, lottery winners) but who ended up in financial hardship as they simply spent all their money. Essentially, we need to make sure kids grow up wanting to be 'Wealthy' (having money which makes them more money), not 'Rich' (using money just for spending). To help you teach your kids the difference between being rich and being wealthy, please read the blog ‘Rich Kids vs Wealthy Kids’.
Recommended Book: Rich Dad Poor Dad for Teens by Robert Kiyosaki,
Recommended Game: Pay Day
Recommended Podcast: Epic Real-World Money Stories
Don't leave your kids' financial future to chance - start teaching them about money today!
Regardless of your financial position, if you follow these actions at these ages, I’m super confident your kids will grow up financially healthy. They could even become the next Warren Buffett!
Train them to earn money and follow the Three Rules of Wealth:
Spend less than you earn
Invest what you save
Remember, a part-time janitor became a multi-millionaire by following these 3 rules!
As you think about teaching your kids about money, make sure you don't make these 4 parenting money mistakes. Also, don't take for granted that your kids will be financially ok just because you have money yourself, I sometimes feel sorry for the Rich Kids.
What to do now?
Now that you've read this guide, I would recommend you refer to the links to the topics within your child's age group (summary below). These blogs will help you learn how to teach your kids the important lessons, even if these topics are new to you. Alternatively, you can learn everything you need to know via our online course.
Knowledge and action are two different things. When it comes to money, there are a lot of people who know about money but they don't benefit from this knowledge as they don't take action. I hope after reading my blogs, you take action to help your kids become great with money!
Age 4 and below:
Ages 4 to 7:
Ages 8 to 12:
Ages 13 and above:
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Thanks for reading!
P.S. Please take the time to share this guide with parents within your network. All parents need some help teaching their kids about money.