girl counting stacksof moneyI was frustrated when I read this headline that proclaimed that money habits are set in a child by the age of seven.  Seriously?  Seven?  So I contacted one of the co-authors of the study, Dr. David Whitebread of Cambridge University, and asked for the full study to see for myself if this was really true.  What I found out was that the headline was more provocative than the results – but not by much.

The actual study concludes that money habits can be shaped in children starting as early as age 4 as kids have the developmental abilities to learn good money habits.  And, by the age of seven, some core money behavior has indeed been established.

However, in no way does this mean that if kids have not learned good money habits by age seven that parents have lost the opportunity to shape good money behavior in their children. Not by a long shot. Nor does it mean that teens are doomed if they are just beginning to learn this stuff.  It just means that when we are teaching teens, we are now trying to change core behaviors that have been set – much harder to do, but not impossible.

Behavior shaped and set by age 7

The study concludes that a child’s behavior can be shaped and will begin to set as early as age seven.  So something is definitely happening and much earlier than most parents think this kind of learning can happen.  For example, some core money behaviors and habits formed in young children are:

“…by the age of seven, most children have grasped how to recognize the value of money and to count it out; and by this age they will also have come to understand that money can be exchanged for goods, as well as what it means to earn money and what income is;

…by the age of seven, most children…are capable of complex functions such as planning ahead, delaying a decision until later and understanding that some choices are irreversible; but children under eight years old have not developed an understanding of the difference between ‘luxuries’ and ‘necessities’ (Wants and needs).”

What this means for parents of young children is that your children are developmentally capable of learning smart money habits much earlier and at an age when they are still listening to us, love us and still think we are geniuses!  The very good news in this study for parents is that we now know not to wait as we have a real opportunity to shape money behavior in our children long before they reach their teens.

Window of opportunity – a few ideas

Okay – so now that we know we have the “window” and the child development experts say what we teach our kids about money will stick – even into adulthood – how best do we jump through that window of opportunity? Here are a few ideas to start with this summer:

Teach choice. Use the Money Savvy Pig to introduce the four choices for money to your child.  Teach them that there is more to do with money than just spend.

Set goals. Teach your child to set goals for the money choices in their lives.  Kids need to know what they are saving for to maintain their interest.  Goals help them delay the gratification of spending right now.

Success breeds success.  Once a goal is realized, set another one.  Help your child more quickly reach the goals they set.  Match savings; create opportunities for them to earn money towards the goals.  Talk about those goals with them at least twice a week to keep them alive.  Show them how it is done and set a goal or two for yourself.  Kids do what we do, so model the behavior you want to see in your child.

Make a list.  Show them how to make a list of what they want and need.  This list will be the lesson that helps them to begin to understand the difference between wants and needs.

Read about money.  We have a reading list on our website of the children’s books on money that we think are great.  Click here to find the list and then hop on over to the library and start reading about money every day. These books are money conversation starters. And, the more you talk about this, the more your child will learn.

Summertime is a great time

It’s summertime so, lemonade stands abound.  This summer, make sure your child understands the cost of a lemonade stand as well as the power to earn money.  A friend of mine told me about a “kids-only” garage sale they organized and how the organizing mom kept track of the cost of the posters to advertise, and the materials to label items for sale and required each child that participated to kick-in towards the expenses.  Just brilliant.

Net message here is that we have more quality time than we thought to reach and teach our kids about money.  And, that time we have is at a great time in our child’s life when they have, well, more time to devote to this very important education.

*Here’s the link to the study and the whole story behind the headline:  https://www.moneyadviceservice.org.uk/en/static/adult-money-habits-are-set-by-the-age-of-seven-years-old-shows-new-study

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Written by Susan Beacham
Susan Beacham founded Money Savvy Generation in 1999 after almost two decades in private banking and investment management complemented by considerable time teaching at the elementary level.

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