Kids Learn Money Skills Before Age 7

Cambridge University agrees–children learn money skills before the age of seven. Because a young child sees what happens at the cash register. Seeing what money does happens long knowing how money works.

Parents are the most effective teachers in the early years. Behavior experts say that children shape many of the money habits they will carry into adulthood. The study recognizes the power of parents to help kids develop good money management skills starting at home.

These years are a great time for you to show and tell as it relates to the world of money. You start by showing your child money in the form of cash and doing the activities in my book, The No-Cash Allowance.

As your child learns about cash you tell how money works by explaining what you are doing when you use cash and cash substitutes (check, debit card, credit card, electronic fund transfer).

In addition to giving children money to manage, there is a new wrinkle in teaching kids about money. That is our continuing trend to cashless transactions. This means that money many not exist as cash, but only as a number.

So, in addition to giving your children an allowance you can help them develop the skill of keeping track of their money. This is easily done using an account log like this:

Easy to use for young kids

If your child writes in the weekly allowance they will record more than 900 deposits before graduating from high school. Consequently, your child is learning that money can be managed as a number.

Money concepts for young kids

Parents play a big role in helping a child learn five important concepts before age seven. These are building blocks to learn money skills.

  1. Money buys stuff.
  2. You have to have enough money to buy something.
  3. People work to earn money.
  4. Money can be cash or something that represents cash.
  5. It’s okay to “not spend” so there is more money to buy something later.

Note to parents: For kids, the act of “not spending” is a form of saving. Because the child makes the decision to defer spending he is motivated by a result he expects in the future, e.g. a toy that costs more than he has today.

Of course, there is more to money than spending, but with young children when it’s “all about me” the activity of spending for self is the starting point. Having money is a big deal to a young child. Going shopping and making decisions about using money is even more exciting.

Lynne Finch helps parents teach their kids about money from first allowance to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school through high school.

Pencil and Paper Help Kids Learn to Manage Money

girl managing allowance with pencil and paper
Girl managing allowance with pencil and paper

It’s time to teach our kids to learn to manage money as a number. All you need is a pencil and paper. You pay your kids’ allowance  as a number. The kids keep track in their account.

The one rule is this: every money transaction is recorded as a number. Consequently, if the numbers aren’t written down the money doesn’t exist. Period.

Keeping track of money as a number teaches:

  1. Numbers show how much money one has (balance).
  2. Depositing (earning) money makes the number get larger (addition).
  3. Withdrawing (spending) money makes the number get smaller (subtraction).
  4. Money can be spent as cash or check or credit card or debit card.
  5. Each spending transaction is subtracted from the total.

No-cash allowance in action

One daughter adds her weekly allowance and records the new balance. She announces that there’s enough to buy a new game. Her sister updates her own balance and asks me if we could stop at the bookstore.

I take the girls shopping and pay for their purchases using my credit card. When we get home they subtract their shopping expenses and update the balances in their accounts.

Throughout this experience no cash has exchanged hands yet everyone knows exactly what happened. The girls deposited money as a number and balances grew. They go shopping, subtract the numbers in their accounts, and balances get smaller.

Get started with these allowance logs

Grab a pencil and start using these logs to give your kids a real-world money management experience at home. Pay your kids’ allowance with numbers instead of cash..

The basic account log works well with younger kids and the checkbook format helps older kids understand a standard checkbook register. Download and print both froms using the links below. The spreadsheet format is for use with computer programs that read .xls files.

Basic Account Log.  This log is easy to use with younger children. (download PDF)

Checkbook Format Account Log. The checkbook format is for older kids and uses TransType, Date, Transaction Description, Debit, Credit and Balance columns. (download PDF)

Computer Spreadsheet. Older kids can use a computer to update their logs. (download file)

Kids manage money with a pencil? Easy!

In conclusion, money is all about the numbers! You don’t manage their money entirely with cash and your kids shouldn’t either. Teach your kids now that money is a number. It’s the best lesson you can give them before they become adults.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children to manage money as a number starting with kids as young as pre-school and continuing through high school. 

Helping parents teach their kids how to manage money as a number.