Parent’s Guide to Teach Personal Finance to Primary Schoolers

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Teaching Money to Primary Schoolers builds the foundation for effective use and understanding of finance as they grow into teenagers. As children transition through their primary school years, they begin to form a more mature understanding of the world around them. During this age, we can help them understand the value of money, earning and income, delayed gratification, unit price calculation through hands-on activities and real-life experiences while allowing them to make mistakes and learn from them.

As kids start to have a more mature understanding of the world around them, it’s time to take them into slightly more complex subjects related to money. By this age, kids have fairly independent decision making skills and understand outcomes. These formative years provide an excellent opportunity to introduce kids to fundamental money concepts, instill good financial habits, and prepare them for a lifetime of financial well-being. In this blog, we’ll provide actionable tips for educators and parents to make financial education engaging and effective.

Benefits of Teaching Money to Primary Schoolers

Financial literacy is a critical life skill. Financial Literacy for primary schoolers between the ages of 6 and 10 is an investment in their future. Teaching money to primary schoolers will set them up for success in their adult life by:

• Building Strong Foundations: Teaching kids about money during this age helps them develop a solid understanding of financial concepts from an early age.
• Instilling Responsible Habits: Early exposure to money management encourages responsible spending, saving, and budgeting habits that can last a lifetime.
• Empowering Decision-Making: Financial education empowers kids to make informed decisions setting them on a path toward financial independence.
• Strengthening Math Skills: Learning about money naturally enhances mathematical skills like addition, subtraction, multiplication, and division.
• Fostering Financial Confidence: Familiarity with financial concepts boosts children’s confidence in handling money and making financial choices.

Teach Value of Money to Primary Schoolers

While preschoolers and kindergartners may be able to count coins, they do not yet understand the “value” of respective coins. As kids start Grade 1, they should be able to associate value to respective coins and understand that not all coins have same value. Thereby, they should now understand that not all denominations carry enough value to buy respective goods or services. Anna Berti and Anna Bombi in their book The child’s construction of economics suggest that it may not be untill the age of 7 when children understand that money can be exchanged for goods or services only if the denomination tendered to cashier (value of money) is more than the cost of the item.

Make Teaching Money to Primary Schoolers Fun by implementing:

• 5-dollar shopping trips: Put your child in situations where they have to actually deal with actual money while shopping. Give them a defined amount ($5 may be apt at this age) to help them understand the value of the money. Furthermore, this will facilitate decision making to focus on items that they really want as that five dollars is gone once they make a purchase.
• Store Play: Set up a pretend store at home, if you do not want to spend actual money, allowing them to make simple transactions using play money.

Teaching Primary School Students about Earning and Income

While understanding value of money while purchasing items is good, kids also need to know how money is earned. Kids need to understand and have an it ingrained in them – Money comes by Work. Pocket money which is a popular allowance in many households significantly shapes a child’s understanding of earning and income. Hence, it is important for parents and teachers to inculcate the habit of earning allowance through age-appropriate chores and activities.

How to teach primary schoolers about earning an income

• Allowance system – setup an allowance system with your kids; Define chores that they can do based on their age and pay them when they perform those chores. Some of the chores that can be taken up include setting up dinner table, cleaning out room, taking out the trash etc. Ensure to include your kids while deciding chores and the corresponding amount. This will help them establish relationship between effort and earnings. As they learn through experience, they can always revisit the earnings for respective chore. Setup and play with the Allowance management system of a budget planner for kids
• Take your kid to work, if possible: On take your kids to office days, talk to them about various jobs and activities that adults do to earn money. While someone can be a receptionist, some else can be a janitor to earn money. This will also help them understand that nothing supersedes earning money through honesty and hard-work.
• Board games: Board games like Monopoly Jr. are a great tool for kids of this age to learn the concepts of earning, investing, and saving while having fun.

Teaching Money to Primary Schoolers by Practicing Delayed Gratification

While shopping with kids, it is not surprising for them to roll their eyes in a sweet manner and ask for a cute dress or toy that they saw and liked just now -“Dad, I love this dress. Can we please buy it?“. After all, kids are an expert in capitalizing impulse buys. This is where, our job as parents is to teach and inculcate the behavior of Delayed Gratification (which is nothing but the ability to resist the urge for an immediate, smaller reward in pursuit of a greater reward at a later time). This behavior goes a long way in building financially savvy kids who can manage their money effectively. Please note that the concept of delayed gratification can be fully understood by kids only if they have a fairly good understanding of “now” versus the “future” (research has shown that this typically happens when children are able to recite months of an year in correct order)

How to teach delayed gratification to Primary Schoolers

Conduct Marshmallow Test with Your Kids

There is no better way to teach your kids delayed gratification than conducting your own marshmallow experiment (originally study can be found here) with your kids. Give them a marshmallow. Explain it to them that if they don’t take this, they will be given with a better option in half an hour. Let them be creative in ways they want to distract themselves. If they need help, distract themselves by guiding with some options:

• Counting numbers (backwards, if possible)
• Dancing or getting their body to move and have fun
• Give them something else to play with
• Going for a walk or a bike ride

Rationalize Buying Pattern and Behavior

Next time, when your son or daughter asks you to buy a piece of toy, clothing or chocolates, you can let them know to use their hard-earned allowance to pay for it. This will help them avoid impulse buys as they will now consider the effort that they had to spend to earn money. Also, motivate your child to think for an hour before they purchase anything above $10 (discuss and define the waiting period as well as amount with your kids). Have them really think if the item is something that they really need or, is it just a want.

Goal-based Money Management and Savings

Define realistic savings goals with your kids (define goals that incentivize them to save). Encourage your children to save for defined goals. Next time, when they want to make an impulse purchase, tell them about the impact it is going to have towards their savings goal. Use a savings tracker app to setup savings goals for your kids and track it with them. Show them opportunity cost.That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes. Also encourage them to save by matching contribution to their savings bucket

Introduce and Practice Unit Price Calculation

Unit price, as a concept is relatively tricky to understand and practice. Even adults (myself included) have difficulty calculating unit price while making purchase decisions. Even though it is one of the most important factors while making buying decisions, it is often overlooked. As kids mature and are able to calculate fractions, it is time to introduce them to concept of unit price. Explain it to them that items come in different weight, size and quantities and sell for different amount. The unit price defines the cost per unit of item. It can be per liter, per kg or per unit). While making buying decision, we need to look at unit price to optimize our spend. As an example, there are two packs of milk:

• Option 1: A 2 liter pack costing $6
• Option 2: A 3 liter pack costing $6.5

In this case, the unit is quantity (liter). The per unit cost of both the options is:

• Option 1: Cost ($6)/ Quantity (2 liter) = $3 per liter
• Option 2: Cost ($6.5)/ Quantity (3 liter) = $2.17 per liter

In this example, as we see option 2 is going to cost us less and should be considered while making buying decision.

How to teach your kids unit price calculation?

• Take them shopping: Take your kids grocey shopping. While buying groceries, have them define unit and calculate unit price for each of the items. Explain it to them how unit price played a decisive factor in your purchasing decision.
• Unit price game: A useful game that can be played with your kids to calculate unit price is available here.

Conclusion

During primary school, children are not only gaining a more mature understanding of the world but also starting to form habits and attitudes that can shape their future. It’s during this period that introducing them to slightly more complex subjects related to money becomes essential.

Teaching Money to Primary Schoolers lays the foundation for a lifetime of financial well-being. It equips young learners with crucial money concepts and nurtures responsible financial habits. Understanding the value of money is an essential first step, and practical exercises like the “$5 shopping trip” and pretend store role-playing help children grasp this concept.

Introducing them to the idea of earning income through allowances and age-appropriate chores fosters a connection between effort and earnings. Teaching delayed gratification, often through real-world saving goals, instills the vital skill of waiting for a greater reward in the future. Lastly, teaching unit price calculation empowers kids to become savvy consumers, capable of making informed buying decisions. These foundational lessons, delivered by parents and educators, are invaluable for guiding children toward making wise financial choices and securing their financial futures.

Put them in situations where your child can experience these money concepts rather than just hearing about them. Take them grocery shopping, help them setup and track towards a savings goal, use real money as far as possible, involve them in family financial planning to the extent possible. Most importantly, allow them to make mistakes as they can learn some of the most valuable lessons through their own mistakes.These early mistakes and lessons will have a minimal impact on their financial well-being and prosperity in adulthood.

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