Teaching Kids About Money – 6 to 10 Year Olds

Updated: May 13

From age 6 years and up, children begin to understand "cause-effect" relationships. A cause-effect relationship is a relationship in which one event causes another to happen. The cause must occur before the effect.

Where money is concerned this changes the way children perceive money. Your child can see that money is directly tied to the purchase of items. They also begin to acknowledge that parents work for money. Work is the "cause" and money is the "effect". Once earned, money is the "cause" and purchasing the item is the "effect".

Children, Money, Buying goods
Cause and Effect of Money

Children can also determine that money is spent differently. Smaller items may only require one purchase, while larger items require multiple payments.

In a cashless environment they may also see that some purchases, like online purchases, are made without physical money.

This is an important age. Try to create an environment where budgeting can be fun and saving money leads to an understanding that they can buy larger, more expensive items. Help them understand the importance and value of money.

Introducing differences between types of spending can help children gain an understanding of how others spend their money too. Lay the groundwork for building a good money mindset by incorporating budgeting and saving in their daily routine.

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Differences in the types of spending

Products vs. Services

Money isn’t always spent on products. Sometimes it’s spent in return for services. It’s important for children to understand the difference.

In the age of technology, the line between the two can blur. As an example, apps and streaming services are regarded as products for the purpose of providing a service to consumers. The app, while providing a service is also regarded as a product. The app developer is paid for his skills ie. his knowledge to build and develop the app.

This is also a good time to introduce your child to the concept of work. Namely, people get paid for creating goods and providing services. It’s an opportunity for your child to get to know you a little better. Explain what you do to earn money and how you use the money earned to support your family.

Another way of creating an understanding of this concept is paying your child an allowance. Increase the allowance annually and explain why you are doing this. They are getting older, taking on more responsibility around the house etc. If they want more money then they have to take on more chores.

In addition to making money for the things that they want, you can also let them do budget-related household tasks. Let them plan the weeks menu and then take them with you when you shop for that menu. Look out for specials and show them how to stick to a grocery budget.

This is a great age to include your children in grocery budgeting and shopping. Look through supermarket pamphlets and newspapers and ask your child to help you cut specials out or circle them with a highlighter. When you go shopping have them identify the products and prices at the store. Talk about how you determine what is the best deal. Compare price, quality and weight of a product. Practice adding prices together while you shop.

Most importantly get your child to check your slip to make sure that the store has actually applied the special that was advertised in the pamphlet.

Differences in Spending
Products vs Service

Needs vs. wants

At this age it is crucial to establish a distinction between emotional purchases (wants) and necessary ones (needs) as soon as possible. The real reason for most purchases involves emotion and retailers are fully aware of this. Show your children some of the bills you pay monthly and establish the differences between needs and wants.

The 'four walls" principal can apply here. You are required to work in order to live in your home, feed your family and keep them healthy. You also need transport to get to work. These expenses are non-negotiable. Bond, Rent, Food, Petrol, Medical.

It’s also a good time to teach your children that different families have different needs. For example, larger families may need bigger houses and more food.

After you have discussed these principals you can talk about “wants”. Eating out, takeaways, extra mural activities and expensive gadgets like iPads, games, music are “wants” and are less important than needs.

Short-term vs. long-term goals

Explaining to your child that you make monthly payments towards the cost of your home is a great way to introduce the idea of expense, and of short-term vs. long-term term goals. If your child has something expensive on their wish list, establish that it’s a long-term goal and encourage them to save for that item.

Digital Currency

It’s important to start slowly transitioning from cash to digital money. Open an account for your child and search for apps that can assist with this. Pay their cash allowance into a bank account at an ATM and then go home and show them that the money is in their account online. Obviously younger children should be supervised to ensure that there are no security issues.

Message to Parents

We are big supporters of teaching children to live within their means, pay themselves first and save 15% of what they earn. The only way to teach children these principals is if you, as a parent, practice these principal too. Your child learns by example. So be a good one.

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About our Author

Lauren is a registered member of the National Credit Regulator. Prior to that, she worked as a Financial and Technical consultant for McGregor-BFA (Now INET-BFA). McGregor-BFA provided Trading and Market related data as well as Investment management software to Asset Managers, University Business Schools and Investment entities. Thereafter experience was advanced to the Property Market working as a Project Manager for Propertyi. But it was her career at the IEB in Adult Education that inspired a passion of hers to educate consumers about responsible ways of managing their financial lives and the long term advantages of doing so. It is her belief that financial education should be taught from an early age. By doing so we can create a country that is economically stable, driven not only by work ethics, but by becoming Financially Independent too.

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