This is the second part of a small series focused on teaching kids about money.
Related: Teaching Kids about Money (Ages 5-6)
In case you missed it, the first part (ages 5-6) focused on activities that allow kids to see & feel money.
As kids grow older, they can start to tackle more difficult and complex money issues.
Related: Raising Financially-Savvy Children
When kids turn 7, they start taking an interest in sharing, trading, collecting and comparing themselves to their friends. When I was 8 I had a collection of rocks that I carried everywhere with me. And when Pogs came out, I used to trade with my classmates for ones I liked or needed to complete my collection.
At age 7, kids have an idea of what money is and how it works – which is a great time to start introducing more challenging concepts.
Kids ages 7-8 should be able to tackle the concept of change and how coins are fractions of dollars, and bills are multiples of dollars.
An easy way to do this is to show your child some coins and how many are needed to make up one dollar – ten dimes, twenty nickels, or four quarters. Show them all together and explain that together they make up the same value – one dollar.
Then, you can practice ‘buying’ an item – ask them how much money they will need and what bills & coins they will use. They need to understand that they either need to pay the exact amount or a larger amount and will be given back change.
It’s easy to overlook the concept of change since most people pay with debit or credit, but the concept of making change a basic skill that every child should learn.
Ideally, they should be able to at least estimate how much change they will receive in their head without the use of a calculator when they buy an item at the store.
Kids also need to learn that the listed price is not the actual price they will pay – there are sales taxes involved in most transactions.
The amount of taxes charged will depend on where you live – so it’s probably easiest at this point to focus on buying items in your own area.
Most kids won’t be able to do the math in their head – so experts agree it’s fine to show them how to calculate the taxes on a calculator.
When they have change & taxes mastered, they’ll be ready to go on a shopping trip to see the purchase in real-life.
Needs vs. Wants
Distinguishing between wants and needs is (in my opinion) one of the most important money lessons a child can learn – and this is a perfect age to introduce it.
An easy way to explain the difference is to start with things the child is very familiar with – things they use on a daily basis.
Here are some examples of a ‘need’ they’ll understand:
- Their bed
- Their clothes
- Their shoes
- Their toothbrush
Here are some examples of a ‘want’ they’ll understand:
- Their favorite toys
- Books they read regularly
- Board games they play often
- Souvenirs they have
You could help them go through their own items in their room to see if there is anything they no longer need. Maybe there are some toys they don’t use that can be donated, or broken items that can be recycled.
There are lots of other opportunities to explain the difference between wants and needs. When at the grocery store, you can explain that you need fruits and vegetables (to stay healthy) even if you want to eat chocolate and potato chips.
Giving a child an allowance is somewhat controversial, but most families that do start at the age of 7.
They’re into grade school at this stage and are ready to start saving and spending. Giving them a regular, small allowance allows them to see how money works on their own.
There is no set amount of allowance that experts recommend and it varies between each family but they do say the payment schedule should be consistent (weekly, bi-weekly or monthly).
Surprisingly, most experts recommend an allowance not be linked to household chores. This is because chores should be expected of everyone in the family – and they should be done for free!
Conclusion: at ages 7-8, kids can start to grasp more difficult money concepts like making change and taxes. Separating wants from needs is very important and can be explained virtually everywhere (including the grocery store).
What other ideas do you have to teach kids about money at ages 7-8?