Adult money habits are set by the age of 7 years old *
(But poor habits can be improved)
* The Money Advice Service, an arms length body set up by the UK Government, carried out a study in 2013 that showed that adult money habits are set by age of 7 years old. They comment that, "this highlights the power of parents to foster money skills at home - core behaviours which they (children) will take into adulthood will affect financial decisions they make during the rest of their lives"
Based on the evidence in the report, parents were urged not to underestimate the effect their own good (and not so good) money habits will have on their children.
The good news for adults is that bad habits can be changed and replaced with good habits, and whether it's the parent, the child or both, it is never to late to start.
Learning good money habits as children means that when they make mistakes the cost is not too high and they can learn from them, and they can start putting into practice what they are learning, getting those good habits in right from the start. Beth Kobliner, author and financial journalist, claims that parents can start teaching kids about money as young as 3 years old.
Earning wisely can include putting our energies in the right direction, identifying what we like to do and what we are good at, being equipped through education and gaining experience, being a willing worker and looking after our health and well being including family and leisure time.
If we don't have money then we can neither save it or spend it, and to have money we must first earn it. It is important for teaching kids about money that they learn this connection early.
The privately owned New Zealand website MoneyHub, on their page "The New Zealand guide to teaching kid's about money", advise that pocket money should only be given on the condition that chores get done. They say that pocket money without having to do anything is the same as welfare and should be discouraged.
To earn wisely is an intentional decision in response to the question, "Am I making the most of my time right now". Through both example and guidance, parents play a huge part in helping children to understand how important it is to earn wisely.
The Budding Fruits app encourages children to earn wisely by being rewarded for the work that they do, and with extra rewards for extra effort, children soon learn the benefits of earning wisely.
Saving wisely can include planning for future expenses and short, medium and long term saving or investment. It can also include where to make investments for the best return and investing in assets that appreciate rather than depreciate.
MoneyHub advise encouraging children of any age to start saving and learning about investing, and from the age of about 12 or 13 to be broadening their knowledge of investing. They suggest for children of any age to open a savings account and to consider paying bonus interest above the bank rate.
Budding Fruits endorses opening a bank account for children as their long term investment, and if using the Budding Fruits app, to apply GYST©(Grow Your Savings Tax)©. Each time the child chooses to spend some of their accumulated reward, a percentage, say 5%, 10% or more GYST is also deducted from their reward total and deposited by the parents into their bank account as their GYST portion.
MoneySmart says that kids should be encouraged to save, and that learning to save is a vital money lesson. They also advise setting savings goals which are easily set on the Budding Fruits app, and the extra advantage is the child can then monitor their own progress on the free child's app .
It is important when teaching kids about money that they begin to understand the importance of saving wisely.
Spending wisely can include planning, budgeting, using shopping lists, and holding out for the best deals. It is about understanding the difference between needs and wants and avoiding impulsive purchases by setting goals and prioritising.
In their blog Five easy ways to talk money with kids, Sorted advises parents to be open and frank about spending money. Talk to them about advertising and where money goes. As they get older they can learn about bills and budgeting.
Budding Fruits suggest playing the "Guess the cost" game when fueling up the car. Show the kids where to find the cost of fuel per unit and how empty the tank is, then get them to guess how much it will cost to fill the tank.
This could be the one value that a parent could instill in their child that will have the greatest effect on the rest of their life, and it is important when teaching kids about money to consider how to develop this area.
An experiment was carried out tempting children with a small reward immediately or a larger reward later. The immediate responses were quite entertaining but the researchers tracked the children's progress as they grew up and the interesting part came years later.
The children who were willing to delay gratification and waited to receive the second reward ended up having higher SAT scores, lower levels of substance abuse, lower likelihood of obesity, better responses to stress, better social skills as reported by their parents, and generally better scores in a range of other life measures.
The researchers followed each child for more than 40 years and over and over again, the group who waited patiently for the second reward succeed in whatever capacity they were measuring. In other words, this series of experiments proved that the ability to delay gratification was critical for success in life.
The good news for parents is that there are things that you can do to train your child in this area. Read about the Marshmallow experiment and be be sure to read the whole article to the end.
The Budding Fruits app is a powerful tool for empowering children with the ability to practice delayed gratification.