3 Reasons To Teach Kids Smart Money Habits Early
Poor financial literacy is a struggle that many Americans face today. In fact, one study has found that only 57% of adults in the States are financially literate. This means that approximately half of the mature population has no emergency savings, no idea how to manage debts or how much to save for retirement, and barely any knowledge of what it takes to create–and stick to–a healthy, long-term budget.
But why are Americans so financially illiterate? There may be a few different contributors to this problem, but one obvious reason is that while most parents believe they have a responsibility to teach their children about money management, nearly a third of those adults never speak to their children about finances. And while smart money management skills can be taught to individuals later in life, studies have found that teaching children about finances in the home when they are still very young goes a long way in improving their lifelong financial literacy.
Let’s take a look at three key reasons why it’s important to help your children create healthy relationships with money early in life.
Children Develop Financial Habits Young
Research has found that children are capable of learning how to save money at a very young age. In fact, the earlier children are taught how to save money, the faster their healthy relationship with finances will grow. This is because they’re taught the invaluable skill of appreciating delayed gratification.
When children learn how to save money, whether through classic methods of allowances and piggy banks or by other means, they simultaneously learn how to create goals and see them through to long-term success via a system of rewards ingrained in them early on. This is far preferable to the alternative of having to learn financial responsibility through potentially boring high school and college budgeting courses, or worse, through a series of financial failures due to their ill-prepared savings accounts.
Life-Long Money Habits Are Set Early On
While it’s important to teach children about finances early to give them their best chance at learning valuable skills, it’s also essential to teach them young because studies have shown that life-long money habits are established well before children hit their teen years. Typically, researchers find this age to be around seven years old, but some have agreed that the number may be as high as nine. This is likely because habits like planning ahead, returning borrowed items like toys, self-responsibility, working hard in exchange for money, and practicing delayed gratification are set early on in life.
That’s not to say that those individuals in their teen years or older are not able to learn better financial skills, but learning and implementing them successfully becomes much, much more challenging.
Financial Savvy is About Much More Than Money
Learning about responsible money management early on is invaluable for children not only so that they learn valuable financial skills and carry them throughout their lives, but also because those same habits will help them be successful even when they’re not dealing with money. For example, when children learn the value of saving money to earn bigger rewards, they learn how to appreciate delayed gratification, learn the valuable character trait of patience, and how to set and achieve goals.
By learning the life skill of goal-setting so young, they are far less likely to give up on future goals they set. Instead, their perseverance will aid them through middle-grade and high school classes, college and job applications, and other major life goals they wish to achieve.