Please Stop Telling me my Kid’s Money Habits are Formed by Age 7

One of the most challenging tasks as a parent is how to bestow financial knowledge and work ethic to my kids. Basically, I want them to be financial rock stars and make all the right moves. I don’t want them to make the same mistakes I did.

I don’t know how many times I’ve read that children form their money habits by age 7. This link is to a Google search of “money habits formed by age 7”. You can see the numerous articles that make this claim.

Let’s look a little closer

Being my usual skeptical self I decided to read the study that everyone proclaims kids are destined to be reckless spendthrifts or super savers by the age of seven. I don’t know if they are reading the same study I did. I didn’t get that from the article at all.

The study asserts that we should teach concepts of counting and that obtaining goods/services with money involves an exchange. They can’t spend the same money twice. It also states that young children see income (allowance or pocket money in their case) as a representation of parental approval. They can also interpret it as kindness rather than an earned wage. The study also stresses the importance of teaching children delayed gratification and strategies to deal with the delay. Media literacy training is also helpful in curbing the influences of advertisers on any persuaded behavior. Improving the critical viewing skills of any media will help the child in evaluating media influences.

Another interesting part of the study included how kids view saving. They didn’t see the benefit of engaging in this kind of behavior because of the delayed gratification component. They enjoyed saving because the were engaging in “adult behavior.” The kids wanted to mimic what mom and dad were doing. I imagine they got some praise for it too from the caring parents. That was probably another reinforcement.

My favorite part of the study is this quote:

In summary, the evidence indicates that teaching young children explicit forms of ‘financial’ knowledge per se is likely to be ineffectual in shaping or changing their behaviours.

So, if children form their financial habits by age 7, it isn’t by parents teaching them poor money habits with financial knowledge. The same is true for good money habits. You can’t sit down with your six years old and debate the benefits of a three fund portfolio or the advantages of maximizing a contribution to your 401k.

Any parent that has lived on the planet Earth is saying, “Duh Tom, thanks for the groundbreaking statement!”

What did it tell us?

What I got from the study is that parents help form critical thinking, understanding the benefits of delayed gratification and basic mathematical and economic principles in the early years. The parents can do this poorly or well, just like a lot of other parenting skills. This fund of knowledge is obtained from the parents because (another duh statement coming) the parents control everything the child does financially speaking for the first seven years of life and for several years beyond. If the parents don’t teach the child about the benefits of delayed gratification, naturally, most children are going to say, “I want it now!”

If the parents don’t teach the child that money and obtaining goods/services is accomplished with a one-time exchange, then he is more likely to have a rude awakening when asks for his the dollar he just spent on a candy bar back from the convenience store clerk.

When I read that my child’s money habits are formed by age 7, it says to me that if I haven’t taught my child to be a financial rockstar by then, I’m a failed parent. Personally, I’m a little sick and tired of hearing that, especially because it’s not true.
Please Stop Telling me my Kids Money Habits are Formed by Age 7

I’m here to tell each parent you are not a failure if your kid isn’t a financial whiz kid by the time he learns to make a sandwich.

Yeah, we could do some good as parents by teaching counting, principles of conservation, and being critical of advertisers. The bottom line is kids don’t get a lot of the financial principles we would try to teach them initially. Saving for delayed gratification and earned income go over their little heads. They are basically mimicking what we do and that is exactly what kids do.

Talking this study over with my wife, we both laughed at the simplicity of the information found true. We both just shrugged our shoulders and said, “What parents think their kids have their concrete money habits solidified by age 7?” How can little Sally have money habits when she doesn’t even know how it works?

We CAN teach our kids something

The study is telling us kids do learn some skills that will help them just be better human beings. They gain some prowess that helps them become smarter consumers over time at an early age. It doesn’t tell us we have to have our kids trained with all the right money-related behaviors or we are totally failing them. I think the topics discussed pertain to a whole lot more than money.

Please Stop Telling me my Kids Money Habits are Formed by Age 7

These do make a killer milkshake.

If you don’t learn to delay having a milkshake with every meal, you are probably going to end up in the doctor’s office more often.

If you don’t learn to be critical of the news channel and what the on-air personality says, you may be unnecessarily getting angry or worked up without knowing all the story.

Reading this blog and others without verifying the information could land you in some financial or another kind of trouble.

As for me, I’m going to keep finding opportunities to explain financial concepts on my kids’ level. Check out Setting our Kid’s up for Financial Success to see how we plan to do this. I use illustrations and examples they understand. Unfortunately, they won’t have a good idea of how to manage their finances until they are into adolescence and even early adulthood. That’s good in my opinion because I get to keep being a parent and keep teaching them. I get to help build another facet of our relationship and that is awesome. 

Use Personal Capital to track all your expenses like I do. It’s very easy.

So what do you think? Am I reading this study wrong? Are we failing our kids if they don’t have the foundations for financial mastery by age 7? When did you feel like you had a good understanding of how money, the economy, and financial management works?

Tom is a doctor, husband and father of five with a passion for parenting and finance. When he isn't skateboarding, riding BMX, or jumping on the trampoline with his kids, he is reading and writing about personal finance. He helps high income parents educate and mentor their kids to become financially, emotionally, and intellectually self sufficient.

15 Responses to “Please Stop Telling me my Kid’s Money Habits are Formed by Age 7

  • I really like this article and approach… teach your children principles and help them to foster good habits vs focusing on “money rules” early on or giving up if they aren’t money saints by age 7! With a 2 year old running around our household, we are beginning to encounter more and more opportunities to teach him along the way. Its a daunting duty, but one that I look forward to learning from over the next few years!

    • Thanks for stopping by Mrs. AR.
      That’s good to hear you are already getting the ball rolling. We’ve did the same and we’re still finding opportunities for educating about finance as our oldest is 15 now. Hopefully it never stops.

      Tom @ HIP

  • The question this post raises for me is define financial habits. In a way your right. I don’t expect a seven year old to understand things like compounded interest… But, as you denoted there is an aspect of training their personality to accept delayed gratification and limiting yourself to values. These might form early

    • That’s a good point FTF. Define financial habits.
      I think of financial habits as money management but I guess others define it differently.
      If people want to say the foundations for finance management start early then that is fine with me.
      The way most articles blindly quote or proclaim that money habits are set by age 7 is deceptive.
      Things like self control and basic math skills are initiated at age 7 but we all know plenty of stories where people had a financial awakening in their 20s, 30s, or later.
      Thanks for reading.

      Tom @ HIP

  • I also think the concept is a bit absurd. As a 30 yo woman, I’m still forming my spending habits and struggling. Maybe they meant kids have a better understanding of what we use money for by age 7?

    I can’t wait to teach Baby FAF the importance of frugality. Mr. FAF and I will be great examples for him. But based on my experience, some kids/people just like spending no matter what they’re taught at home. I guess they need some major life changes to see how important it is to save.

    • I agree Ms. FAF about kids pave their own way on some financial habits. That probably happens in lots of areas. The same parents teach different kids the same things and one child follows the parents’ direction to a tee. The other does the exact opposite.
      As a parent, I teach them the best skills I can and ultimately they will make their own decisions as they grow. At least from the parent point of view, we can encourage good behavior and not enable bad behavior.

      Tom @ HIP

  • Dood, el Farbe
    7 months ago

    I agree it seems silly to proclaim that their habits are set at such a young age. As a younger man I spent everything I made without care; when I left the Army and started working my way though UG, I became more and more frugal as time went on. I also know many adults for whom the frugality light bulb suddenly came on later in life so I think that to the extent the habits may be “formed” relatively young, they’re malleable or weakly ingrained habits that can be overcome by conscious effort.

    But from the limited observational data pool of my own 4 kids, I think there may also be a fair amount of hardwired propensity toward frugality or spendthriftitude**.

    As parents, our own spending habits have changed little (or not at all) since we were married, so the 4 kids have grown up with very similar circumstances from an environmental and parental examples standpoint.

    Two of the kids are very frugal/cost conscious. They buy most of their clothes at thrift shops/Goodwill (bargain hunting gets them jazzed). They usually order inexpensive entrées if we go out to dinner and just get water with the meal (as do my wife and I). It took me a long time to ferret out that the rationale for the supposed top college pick for one of them was based solely on getting a full ride. Whereas the real top choice – with a significantly better engineering program – did not include room/board in the scholarship so will cost the Bank of Mom&Dad $8K a year.

    One of the other kids is fairly frugal, and is sensitive to costs, but not quite to the extreme of the two mentioned above.

    The other one is 180° from the rest and has the worst case of spendthriftitude**. Always (always!) zeros in on the most expensive entrées and wants to purchase a beverage with the meal in restaurants. Gravitates toward the most expensive anything in a list of offered similar anythings, whether electronics or hobby type stuff. Newer, bigger, shinier and status visibility is always the bare minimum. As a consequence, I have considerably more money-related conversations with my spendthrift than with the others. Time will tell whether I’m getting through….

    ** Brand new word; use at own risk.

    • Quick, say spendthriftitude three times fast!
      I wonder if the spendy one will be so eager to spend when it’s not your money but instead the spendthrift’s?
      All you can do is lay a good foundation. Eventually, they have to leave the nest. At least you don’t have to enable spendthriftitude behavior.

      Tom @ HIP

  • I’m not going to put pressure on my kid to be a financial whiz at 7. Heck for that matter I don’t expect them to be a financial whiz at 17. I hope they they learn through experiences the proper way to handle money from me and my wife. I think we’ll try to set the foundation but have no expectations that he’ll grasp the concepts at such a young age. So I think the study might be going a bit too far.

    • I think the mindless repeating of a quote was the misleading part. The study made some decent points. I just think some people were jumping to the wrong conclusions.
      I’m right there with you about our kids needing more training even into young adulthood. It’s fun for me so I’m gonna keep on teaching until they tell me to stop. Then I’ll teach a little more. 🙂

      Tom @ HIP

  • You’ve got your 7-year olds making their own sandwiches? We’ve got work to do!

    We try to lead by example and discuss money frequently with them. And not just tossing around idioms like “money doesn’t grow on trees!” We also give them a $3 dollar allowance divided among Spend, Save, and Give jars.


    • Right now it’s just PB & J and usually the kitchen counter looks like a war zone afterwards but by golly, she made her own sandwich and proudly eats it!

      Thanks for stopping by. It sounds like you are laying a good foundation for future educational opportunities.

  • I think it’s true that you can see a child’s personal tendencies at that age – it was very clear that my sibling was a spender and I was a saver at those ages by the way we managed our red envelope (Lunar New Year) money or candy hoards. But how that plays out in actual life post-age 7 is absolutely affected by the other life skills that you’re taught and the circumstances you encounter. It’s our job as parents to teach critical thinking and priorities and basic facts like the existence of taxes, but to some degree, your child is a person with their own thoughts and habits and you won’t be able to override all of them if they’ve got not good habits.

    Lived experience goes a long way toward shaping an individual, too, even more than parental influence. In my culture, it’s taboo to place the onus of responsibility on the child, even when they’ve become legal adults, because the belief is entirely centered on the parents’ responsibility but I’ve come to see that parents cannot be the end-all be-all, in all cases.

    • I haven’t been able to find any information on children being taught one way or the other when it comes to saving money or being a spender.
      I doubt we could have a legitimate study where a set of parents teach kids to spend without caution and see how the kids turn out vs another set of parents that teach frugality and see how those kids turn out. Then maybe we could get a better gauge on nature vs. nurture. Thanks for commenting and reading.

      Tom @ HIP

  • Love it. But strongly disagree. Keep us thinking and our toes. Make it a Sammyriffic day!

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