Psychologist and expert Erik Bohjort outlines the best ways for parents to simply explain financial matters to young children.
My nine-year-old son doesn’t understand the value of money. How can I help him grasp the basics of financial matters – or should it be the school that teaches him?
Psychologist Erik Bohjort, head of research at the pocket money and chores app Gimi (gimitheapp.com), says: “Schools often don’t teach children about money in a way that’s needed to thrive in today’s society. In our increasingly cashless society, and with pocket money becoming more unpopular, children are often being left out, having not had good money habits instilled at a young age.
“I believe it’s imperative that children grasp the concept of money as early as possible, it’s helping them to become financially independent as they move into adulthood. No matter how old your child is, instilling the concept of earning, saving, and managing money is vital.
“According to a Cambridge University study, children as young as seven have a general understanding of finances and money. The study also showed that even three-year-olds can grasp basic financial concepts, and yet one in four teenagers are unable to make even simple decisions on everyday spending.
“Nine-year-olds are starting to reach an age where their numeracy skills support new and valuable activities. You can even practise these skills together, for instance, you can try to give them regular pocket money, big enough to cover basic wants, but small enough to encourage them to prioritise and save. This can be done with real money or with digital piggy banks.
“Involve them in everyday money management activities, like planning what to buy at the supermarket , show how you calculate the spending or even build a general understanding of household bills. Encouraging children to make decisions about a specific amount of money is a great way to learn about the value of money.
“Giving children activities or day-to-day tasks is not only much more enjoyable for a child, but it helps them become confident about making their own decisions, whether that be about savings, interest rates, or allowances. Start with planning an activity together and then define a budget, for example, £20, and discuss how you’d like to use the money while taking into account what’s affordable. Then, research what you’ll choose to buy, and work out which items may be better to buy (are there any offers available?). Make sure you save all receipts, and then evaluate if you managed to stay within, or broke, your budget.
“Give children a chore, such as emptying the dishwasher. Once completed, parents can reward them with pocket money. This will help them get an understanding of earning money, through positive reinforcement.
“Today, many children learn about money management from their virtual realities, such as playing games with virtual currencies. Remember that gaming can often be a source where they get to practise earning, spending and saving.”