Kids & Finance: Three Activities to Reinforce Smart Financial Choices

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Kids learn financial behavior at a very early age. In fact, by age seven, most children have cemented their money habits for the rest of their lives according to the report “Habit Formation and Learning in Young Children” from the University of Cambridge. The findings of this study reveal the powerful role that parents play both in modeling financial behavior and helping their children learn healthy habits.

Beth Kobliner, author of “Get a Financial Life” and member of the President’s Advisory Council on Financial Capability thinks that parents should take advantage of “teachable moments –” instances in daily life when kids can gain a practical understanding of how to manage their finances. Turning everyday activities into financial lessons helps underscore how essential it is to make good money decisions.

Three activities that can help reinforce good spending, saving, and security decisions with children:

1. Shop Together

To help your child learn wise purchasing behavior, the Money as You Grow website recommends taking them shopping with you. When parents include children in the decision-making process, they demonstrate how to weigh spending options.

Money as You Grow also explains that parents should describe why they choose one item over another: Quantity vs. quality? High price vs. low price? Kids should be aware that there are alternatives to buying, so Money as You Grow recommends discussing whether the item in question could be borrowed from someone else or whether could it be found elsewhere at a lower price.

In her Forbes article, “The Five Most Important Money Lessons to Teach Your Kids,” Kobliner proposes parents make money conversations practical by asking their children to participate in price comparison activities. She recommends giving a child a fixed amount of money (like a few dollars) and asking them to decide which type of fruit or cereal to purchase.

2. Start a Savings Account

A study published by the Center for Social Development at Washington University in 2011 discovered that when kids have a savings account in their name, they’re more likely to go to college – regardless of how much money is in the account. According to the study’s lead author, William Elliot III, just having that account in their name encouraged kids to start saving money.

The Money as You Grow website recommends parents open a savings account for their child when he or she is between the ages of six and ten. It also suggests kids and parents have a conversation about how money can grow in a savings account and how it is protected even if the bank goes out of business.

Janet Bodnar, Editor of Kiplinger’s Personal Finance, says that practical activities and conversations are excellent ways to teach children to save. Allowance is a great place to start, she explains in her article “Teaching Kids to Save,” because it helps them take ownership of their money.

Consider making a savings jar part of that equation, recommends Kobliner. Every time a child adds to their savings jar, she explains, it’s a good idea to go over how much they have and how much more is needed to reach their goal.

3. Take Financial Precautions Online

There’s no question that the Internet plays an active role in many children’s lives. A lot of kids understand the concept of online shopping from an early age. has a section dedicated to keeping kids safe online. It suggests that parents and their children sit down and create an online code of conduct together.

Discuss the qualities of websites where it’s safe to spend time, and the qualities of websites that may be dangerous. Let them know how essential it is to safeguard personal information – especially online.

The Money as You Grow website makes similar recommendations and suggests that parents should both closely monitor kids’ online activity and set restrictions on potentially dangerous websites. They stress that kids shouldn’t be able to make online purchases without their parent’s supervision.

According to Kobliner, parents are their children’s primary models for financial behavior — the first people children will look to for money advice. A few practical activities can go a long way towards improving a child’s financial future and helping them build good long-term money habits.