Money habits are formed by age 7

Jessica Satherley
Money habits are formed by age 7

The Rolling Stones famously sang “You can’t always get what you want” - they could have been financial  educators. 

Experts say financial habits are formed by age seven and teaching kids delayed gratification might just be the key to forming success. 

“We need to teach young children delayed gratification,” says Dr Pushpa Wood, Director of Westpac-Massey Fin-Ed Centre. 

“You cannot have things when you want, how you want, all the time. You can desire something and sometimes you will get it but sometimes not.  

“Money is just one of these things.  If this idea is built from a very young age, it's easier to translate it into money management,” Dr Wood says. 

An example of delaying a child’s gratification could be telling them they can only play with their friends after they have tidied their room and done their homework. 

“You can say, ‘yes you can go but you have to do A, B and C first, then you’re free to go,” Dr Wood says. 

Dr Woods also recommends teaching children to divide their pocket money into thirds or quarters. 

“Dividing pocket money teaches them to save some, spend some, give some and/or invest some.   

“This teaches the notion of not spending it all today but putting some aside for tomorrow,” Dr Wood said. 

“If they want a bag of lollies, tell them to use their money, not the money from the household budget,” she said. 

“Children observe and then they follow so if they observe good financial behaviour in the house, they take note of it and are more likely to follow that as they grow up.  

“But simple observation isn’t enough, so parents need to purposely teach these things to their children,” she said. 

2013 study from Cambridge University also found that financial habits are formed at a very young age. 

“Habits of the mind which influence the ways children approach complex problems and decisions, including financial ones, are largely determined in the first few years of life,” Dr David Whitebread of Cambridge University said. 

“Simply imparting information is now recognised as being ineffective in this area.  

“By contrast, 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,” Dr Whitebread said. 

Dr Wood says being good at money management doesn’t necessarily mean you’re wealthy, but it’s about living within your means and having a planned approach to get out of debt. 

Teaching young children financial literacy and how to manage their money from an early age could set the helpful habits that will follow through into their adulthood.  

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