It's Never Too Early to Start

“Teach the children so it will not be necessary to teach the adults.”

—Abraham Lincoln

"Just get money from the machine."

"Use your credit card."

"Write a check for it."

If you are a parent, grandparent, teacher or dedicated observer of human behavior, you have likely heard one or more of these statements from young children in your family.

This sort of thinking is just one example of the disconnect between what children learn through observing their economic world and accurate economic information. Kids see parents get money from the ATM, swipe their credit and debit cards at the checkout, or perhaps still pay by writing a check. Kids see these transactions and recognize that no coins or bills are involved. They don't intuitively know that there must be money in a bank account in order for ATM withdrawals to happen or for checks to be accepted, and they aren't aware that there's a credit card bill that follows those credit card purchases.¹

These aren't the only misconceptions kids have about money. They think that banks keep in a box the same money kids deposit—so if they deposit five $2 bills, they will get the same five $2 bills when they withdraw.

Often, kids don't recognize that there is a link between work and income. And although most older children realize that they can't have everything they want, they think that when they are adults they will be able to do just that.²

These misconceptions limit children's ability to think economically and solve economic problems³ because it is difficult to build on a foundation that isn't strong.

Simple Steps We Can Take

All of these misperceptions can be corrected—but only if someone teaches children about these things. And the earlier we start doing this, the better.

Recent research shows that young children form financial behaviors by as early as age 7. Their earliest experiences with economic transactions are likely encouraged by and experienced with a significant adult, such as a parent or grandparent.⁴ Parents, grandparents and teachers can assist young children in developing sound financial habits by providing:

• opportunities for them to observe adults engaging in those habits,


• instruction and


• opportunities for the children to practice the habit.⁵

So, grandparents might take their grandchildren on a trip to the bank and deposit coins and currency in an account or drop coins in a jar that is visible to the grandchildren. Then the grandparents might talk about why they save with their grandchildren, and finally they might provide the grandchildren with a piggy bank and encourage them to begin saving.

If children have developed these early basics, teachers, parents and grandparents are in a position to build on kids’ financial understanding in later elementary grades through middle school and high school.⁶ For example, students who know about earning income and saving are better-prepared to learn about compound interest, credit and financial investment.

Don't Underestimate the Kids

We also know that young children can and do learn economics. For example, one study found that students in the early elementary grades can learn concepts such as goods, services, producers, consumers, division of labor, the connection between work and income, taxes and the use of taxes to provide goods in the community.⁷ Later studies support these findings and also show that teacher education in economics and the use of high-quality materials, such as those found on the St. Louis Fed's EconLowdown site, result in significant gains in student learning.⁸

Some teachers believe that young children can start making sense of their economic lives if they understand basic concepts such as earning income, spending, saving, setting goals and making choices. But often these teachers feel ill-prepared to teach the content.⁹

Among the growing cadre of teachers who have prepared themselves to teach this content and to do so long before kids enter high school are Betty Porter Walls and Betty Chism, both from St. Louis.

"They're never too young," says Walls, who teaches college students how to become teachers and also supports the university's early childhood education center. "We're starting very early. We're doing lessons with our preschoolers,” such as a recent story time with the book Bunny Money. "Children know what money is. They need to know how to use it."

Chism would agree that starting earlier is better. She had been teaching personal finance at a high school but recognized that such education was needed sooner. She moved to a middle school, where she teaches both personal finance and computer literacy.

"They don't know anything about spending and saving and budgeting," she said. "I think it's important to teach them … about financial decisions so that they can become financially literate and critical thinkers and decision-makers."

What of the Role of Parents?

Bill Hardekopf, the chief executive officer at LowCards.com, a provider of credit card information, thinks that financial education is ultimately the responsibility of parents.¹⁰ Unfortunately, not all parents provide the necessary financial education, and many do not demonstrate sound financial habits. The Charles Schwab 2011 Teens & Money Survey found that parent discussions about money didn't necessarily translate into knowledge of financial tools for children. And a T. Rowe Price 2016 Parents, Kids & Money Survey found that 71 percent of parents were reluctant to discuss financial matters.

Some parents are more prepared and proactive than others.

Angela Statum, whose 3-year-old attends the preschool where Walls assists, said she and her husband "talk about financial responsibility all the time," but mainly to their 10-year-old. She was surprised that her younger boy was learning about money, too, at school.

"I said to my husband, 'Do you know what they're doing in class? They're doing all this financial stuff, setting up stores and shops.' I'm excited."

Lori Von Holten, another mother of a child in the class, was equally surprised. But, she added, "It makes a lot of sense. There's math you can learn from counting, there are emotional skills with having the restraint to save, there are issues with social responsibility ... and how money plays into that."

Lay a Foundation Early

Schools don't introduce calculus to high school seniors as their first mathematics class; rather, they start with arithmetic in pre-K and kindergarten and build on that foundation in subsequent grades. Likewise, if we expect students to understand complex economic ideas in high school and college and as adults, the foundation should be laid in elementary and middle school.

Economics is the business of everyday life. Children engage in the business of everyday life as they make choices, including those related to spending, saving and even borrowing.¹¹ Just as reading and mathematics education helps children master skills they will need throughout their lives, economic education helps students master knowledge and skills they will need to function every single day—from making personal decisions about their studies and their activities and choosing how to manage their money to making decisions later as workers, consumers and citizens.

A sample of resources for parents and teachers:

• Kiddynomics: An Economics Curriculum for Young Learners is designed for pre-kindergarten and kindergarten students. The curriculum includes five lessons that introduce basic concepts, such as scarcity, choice, goods, services, spending, saving, consumers, producers and banks. Kids explore these concepts through popular children's books and participate in activities.
• Parent Q&As are sets of questions with answers that parents, grandparents or teachers can print or pull up on their phones. Then, when reading to their kids, they can use these questions to start conversations with their children about a variety of topics, including decision-making, saving, savings goals and spending.
• Piggy Bank Primer e-book introduces basic economic concepts—saving, savings plan, spending, costs, benefits, goods, services and opportunity costs—to 7-9-year-olds.
• The No-Frills Money Skills video series covers a variety of personal finance topics and is appropriate for those in middle school and above.

To see these and other resources, go to www.stlouisfed.org/education.