Time to train your children money management BY ADEMOLA ALAWIYE

It is never too early for parents to start teaching their kids the value of money. Kids, who learn how to manage money early, will generally go on to become money-smart adults, ADEMOLA ALAWIYE writes

Parents can avoid future grief and financial hardship by instilling good financial value in their offspring as early as possible. Even the youngest can grasp the concept of money. And incorporating age-appropriate monetary lessons into their daily life can set your children up for a lifetime of financial success.

To many parents, children should not be concerned about money or financial matters until later in life. Such parents often accuse those who expose their children to money matters before they hit their teens of spoiling the kids.

But experts say as long as children are exposed to sound financial training, it is never too early. They warn that parents who wait until their children are in their teens or adults before attempting to teach them about money are unlikely to have any impact as children get to pick their financial habits early in life.

A new study commissioned by the Money Advice Service, an organisation which provides money advice for consumers in the United Kingdom, says at the age of seven, most children’s financial habits are formed.

The study, ‘Habit formation and learning in young children’ was conducted by behaviour experts, Doctors David Whitebread and Sue Bingham of the University of Cambridge.

In the executive summary of the study, which was published in May, they say, “Research shows children can ‘habituate’ effective processes and tendencies into their mental repertoire. These include inclinations to take responsible risks, to persist, to manage impulsivity or thinking ‘outside the box’. These underpin the development of the propensity within a child towards skilful action and effective decision-making in a variety of life settings.

Financial education, increasingly important

By the age of seven, they say, most children understand the core behaviours which they will take into adulthood and which will affect financial decisions they make during the rest of their lives.

A statement by the Money Advice Service on the publication of the study, quotes Whitebread to have said, “In today’s world, there are many pressures on young children and their families which make financial education increasingly important. The ‘habits of mind’ which influence the ways children approach complex problems and decisions, including financial ones, are largely determined in the first few years of life.”

According to him, simply imparting information is now recognised as being ineffective in this area.

By contrast, he says, “Early experiences provided by parents, caregivers and teachers which support children in learning how to plan ahead, in being reflective in their thinking and in being able to regulate their emotions can make a huge difference in promoting beneficial financial behaviour.”

How children learn and develop

According to the study, through the early years, the child’s knowledge base, their awareness and ability to control cognitive activity and ability to self-regulate, grow and flourish.

It explains that as children learn to direct and monitor their learning, thinking and problem-solving abilities reliably and independently, they become “responsible” for their behaviour in significant ways, forming the foundation for further development.

It adds that specific tendencies or dispositions become habituated into the child’s mental frame of reference, observable in their behaviours in approaching further activities.

On how children go about acquiring knowledge, the study explains that a desire to understand their environment, to be in control of their experiences and to make relationships with other children and adults, leads to the child amassing a bank of knowledge about the causes and effects of what they perceive around them within the first four to five years of life.

Stressing that children learn about their environment in two ways: imitation and inductive (or statistical) learning, the study says the modelling of behaviours by adults is a powerful means of supporting learning in children.

Moreover, it adds, the propensity for inductive learning in young children also explains why learning from experience is more powerful than learning through instruction.

Key findings

The major findings by the study about how and when core behaviours and habits are formed in young children include:

By the age of seven, most children have grasped how to recognise the value of money and to count it out; and by this age, they will also have come to understand that money can be exchanged for goods, as well as what it means to earn money and what income is.

By the age of seven, most children in the UK are capable of complex functions such as planning ahead, delaying a decision until later and understanding that some choices are irreversible; but children under eight years old have not developed an understanding of the difference between ‘luxuries’ and ‘necessities’.

Parents as influencers of money habits

The research also highlights the power of parents to foster money skills at home.

It notes that parents and caregivers are in position to shape the money habits of their children – core behaviours which they will take into adulthood will affect financial decisions they make during the rest of their lives.

“Parenting practices and styles in relation to their children’s activities in the early years have a powerful influence upon the child’s development,” it says.

In its statement, the Money Advice Service calls on parents “not to underestimate the effect their own good (and bad) money habits will have on their children”.

It says a combination of good habits at home and simple and playful parenting and teaching resources is required in order for the children to develop good money management skills, which are essential to help them to become financially capable adults.

The Chief Executive Officer, Money Advice Service, Caroline Rookes, is quoted as saying, “This study really demonstrates the power of parental influences, and illustrates how much of what you learn and absorb when you are young, both consciously and subconsciously, affects the choices you make throughout the rest of your life.”

Similarly, the Chief Executive Officer, Personal Finance Education Group, Tracey Bleakley, says the research underlines how crucial it is that financial education starts from a young age.

While calling for financial education to be taught in primary and secondary schools, she states, “Parents have a key role to play in reinforcing this by talking to their children about money and helping to pass on good financial habits.”

Copyright PUNCH.