When and how to start teaching kids about money, according to experts

It can be difficult to know how and when to start teaching children about money and figuring out what skills they need.

Parents often don’t want to worry their children and want them to be carefree – but financial confidence and education can be the key to a happy and comfortable future. Ultimately, boosting your child’s financial confidence is crucial, experts say.

“A good sense of financial responsibility is essential for success in life, as money skills influence important milestones like getting married, finding a job or buying a home,” Susan Hirshman, head of wealth management at Schwab Wealth Advisory, told CNBC Make It.

For example, employers might use credit checks to screen their employees, she explains, and even major purchases like buying a home can be influenced by your monetary history. Establishing good habits early on can help prevent problems, Hirshman said.

Other dangers children may fall victim to when they are not financially literate are potential debt traps such as “buy now, pay later,” says Seth Wunder, chief investment officer at Acorns.

Eric Landolt, Head of Family Counseling and Art & Collecting at UBS Global Wealth Management, went one step further.

“Financial literacy should be a basic skill, a basic skill in the sense of reading or writing or doing something in a way that everyone should be taught under all circumstances,” he said. Money decisions can also have broader implications for society depending on how they’re spent and invested, he added.

It’s clear how important talking about money really is. But when is the right time to start? Experts differ, but it could be a lot sooner than you think.

Wunder said that by the age of six, children begin to grasp some concepts of money.

“This is the age when kids start understanding math in school and the consequences of saying, ‘When it’s gone, it’s gone’ and putting money aside for things they really want,” he said.

By the time children are seven years old, many of their financial habits are already formed, he added, noting that children become aware and curious about money much earlier than many parents might expect.

Hirshman suggests starting even earlier, between three and five. “Then they have the ability to make decisions and reason,” she said, adding that the ideal is to just start and then move on to passing on the parents’ own monetary values.

Landolt falls in between, saying that as young as five is a good time to start, as children are most receptive to messages about family values ​​being passed on by parents or grandparents. He recommends teaching five to eight-year-olds “very, very basic things” like money has value and the implications of the decisions you make with it.

Landolt believes that the issues can be more complex for eight to twelve-year-olds. “One can talk about the different kinds or uses of money. So it could be saving or spending, some of those concepts, build versus invest.”

When children become teenagers, between the ages of 12 and 15, they can be given more responsibilities, such as managing a small budget, Landolt explained. This includes concepts like spending, saving, and understanding how decisions to spend money can affect how much money is left over later, but in more detail, he said. You might also start discussing family-wide financial decisions like supporting philanthropic projects or charities at this age, and getting the kids’ opinions on them, Landolt said.

Finally, 16- to 18-year-olds could learn about how the financial system and banks work, a topic that, according to Landolt, is also often picked up at school.

Whenever you decide to talk about money with your kids, the experts should keep a few things in mind.

Three of the most important things to remember are being consistent, focusing on action, and having ongoing conversations, Hirschman believes.

“You can have them make small and educational mistakes so they can learn from them,” she said.

One way to achieve this is to give them an expense allowance, she stressed. Wunder agrees with this suggestion, explaining that it can teach children about responsible budgeting, spending and saving.

It’s also important to make sure the conversations are age-appropriate, he said.

“The way you bring up the subject with a six-year-old will be different than with a teenager, but they all share the common goal of teaching children the difference between need and want,” explained Wunder.

Finally, as with many other things, parents who lead by example can also have a tremendous impact, Hirshman believes. “It’s important for parents to put into practice what they preach and try not to give mixed messages,” she said.