At what age are children capable of understanding financial concepts such as the value and purpose of money?

According to academic research dating back more than 70 years and pioneered by Jean Pi-aget, children are quite capable of understanding what money is, and for what it can be used, at a very early age. This research has been debated in academic literature for decades, and supported by many researchers subsequently. To understand what a child is capable of comprehending, academicians break a child's financial understanding into four distinct stages: At age four to five, a child understands that money can purchase any object; at age five to six, that the amount of money to be used must exactly match an object's price; in a range of ages between three and six, that he can pay with money greater than the price of the object; and at age seven to ten, full understanding of all of these concepts is achieved. At this point, the child understands fully what "change" is, as a result of a transaction.

What is the earliest age that I should begin to introduce financial concepts to young children?

According to Paul Solman, an economics correspondent for the PBS NewsHour, who analyzed a famous longitudinal study of children in New Zealand, adult financial habits may be determined as young as age three. Children who have difficulty with self-control by age three may have the most difficulty managing their money in adulthood.

What is the first step in teaching my children about money?

Perhaps the first step in teaching your children about money is that you and your spouse share similar attitudes about money, and common goals about saving and investing for the future. Children need to see parents speaking with one voice, with little conflict, on financial matters.

Teaching children about money and saving can begin surprisingly early, as young as three years old.

Teaching children about money and saving can begin surprisingly early, as young as three years old.

 
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