5 things every kid should know about money

Children from a young age know the importance of money. Rather, they feel the importance of money, how central it is to everyday life, how every wish depends on it. Like magic, its power seems to flow from our digital wallets, our credit cards and our mobile phones. Because money nowadays has become almost invisible, it’s even more critical to talk about it and help kids understand the basics of good money management. 

1. Emotional competences vs. numerical skills

Money is more than just a numbers game. Emotions play a big part in how we manage our money. Our emotions are generally driven by our beliefs, most of which are subconscious. If we grew up believing that money is a “good” thing, we are more likely to pursue it in later life (career or investment-wise). On the contrary, if we grew up with a negative perception of money, we are more likely to feel uncomfortable discussing it, negotiating our salaries etc. Being aware of our beliefs is the first step towards developing the emotional competences that will help us throughout our life: being clear about our goals and priorities, differentiating between our “needs” and “wants”, being patient and disciplined, taking some risks (but not too much) and learning from our mistakes.

2. Quick bursts of happiness vs. managing money wisely

Spending feels good. It gives us that feeling of immediate pleasure and satisfaction. We feel good when we buy something, because it releases serotonin and dopamine in our body. That’s why we are prone to “impulsive shopping”. But buying things we don't really need doesn’t make us happy in the long term. It creates the illusion that our happiness depends on the things we own, and can trap us in a vicious circle of always wanting more and thus needing to work more to buy more. 

Instead, the first goal of money management should be to achieve financial security and therefore more independence. This gives us the freedom to spend more time and energy on the things that really matter to our well-being (e.g. experiences, relationships). 

3. Our financial decisions affect nature, animals and other children

Every purchase we make has an impact on the real world. Each time we buy something, there is a long chain of social and environmental impacts associated with this purchase. How was this backpack, pair of shoes or t-shirt produced? Did the production process create pollution in the local environment? Were the people involved in the production paid a fair wage and working in decent conditions? Or was it produced by children in poor countries? If something is incredibly cheap, there might be a reason. Before we buy something, we should try to find out what happened behind the scenes. Looking at the label or at the company behind the product can give us some information about its environmental and social impacts, and guide our choices. The same logic applies to our savings and our investments. 

4. Investing doesn’t have to be complicated

Children often learn about managing money in a binary way. It’s all about spending and saving. Investing seems to be reserved for adults. Yet investing is central to managing money. Through games and activities, children can intuitively understand the basics of investing. Selling homemade cakes or bracelets for instance shows them that investing is essentially about putting your money to work to support the development of ideas that will (hopefully) create value and therefore earn more money. 

Through these experiences, they learn that the key questions behind any investment decision are relatively straight-forward. How does this work and create value? What could help make this a success? What could turn it into a failure? Asking these questions is fundamental. Otherwise investments are little more than speculations, driven by the latest hype, which is much riskier.

5. Start early, start small, practice regularly and grow more confident

Good money habits are developed over time. Every opportunity to interact with money is a chance to learn and think about your options. Imagine you are a pirate, and your money is the treasure. How could you make good use of it for the rest of your life? You could split it into four buckets: spending, saving, investing, and donating. Each time you resist the temptation to spend, be proud of yourself. 

Once in a while, buy yourself a treat. Talk to your parents about opening a saving account with a bank that takes sustainability seriously. Explore opportunities to co-invest small amounts with your parents or other mentors. Think about a cause you feel strongly about and how you could help by donating a small amount or volunteering a bit of time once a year. Talk about money with your friends and family, ask them about their experiences and their dilemmas. And finally remember that money is only a tool, it does not define you or anyone else.

Discover many more money management tips for children in the book Your Money and the World by Cecile Biccari, winner of the 2024 MAIAs Award for Sustainable Finance Literacy!