Financial Education for Preschoolers: Findings and Resources
Prosperity Now is currently involved in a number of Children's Savings Account initiatives serving young children, several of which are targeted toward children age five and younger or children in Head Start and Early Childhood Development programs. We know from experience that children's savings initiatives that incorporate both a savings account and financial education combine two powerful opportunities for families: a chance to save and a chance to learn. Since we are working with such young children, we had to ask: what is appropriate financial education for preschoolers? What can we teach children at this early stage about money? Karen Holden from the University of Wisconsin-Madison addressed this question in her study, Financial literacy programs targeted on pre-school children: development and evaluation.
The study discusses childhood cognitive development and highlights some important aspects that many of us already intuitively know. Perhaps most important is that habits children learn when they are young form the basis for their future behavior; in this case, their financial behavior. Since most of the habits children acquire during the early years depend greatly on what they see and learn from their parents, financial education for preschoolers must rely on parents reinforcing these concepts at home. This means that teaching financial literacy to preschoolers can be most effective when the whole family is involved.
So how do we know what money concepts to teach to preschoolers themselves? The study points out that money as an abstract, isolated concept is almost impossible for children to grasp. Preschool-aged children have not yet developed the ability to add or subtract, and they have no direct experience earning money, spending it or using a financial institution to save it. But, they do have a pretty good understanding of the concept of exchange and value and people's willingness to make deals and trade things. They learn this from an early age through constant negotiations with their parents and caregivers and through conditional transfers (rewards for desired behavior). They also learn these concepts through playing and socializing with other children. Children form their own ideas and understanding about money based on their experience and their engagement in social practices involving money. Therefore, an effective way to teach children about the value of money and money management skills is to incorporate these concepts into their daily social interactions and familiar environments.
The notion of time is another important cognitive developmental factor to consider when delivering financial education to preschool children. Children this age do not fully understand the difference between past, present and future, all of which are essential concepts for understanding the principles of saving and investing (i.e., delayed gratification in the present for future gains). According to the study, children first understand the difference between present and future around important life events such as their birthdays. Creating special events around saving, like setting a savings goal for an important date, may be an effective way of delivering financial education that takes into account children's concept of time.
In addition to the fascinating information on children's cognitive development, the study provides a very comprehensive review of financial literacy curricula for school aged children and youth. Some of the programs reviewed were developed abroad, while others were developed in the United States; however, only a few of these curricula target children in the preschool years.
Here are a few of the most compelling preschool financial education resources from that list:
- Thrive by Five (Credit Union National Association): Teaching your preschooler about spending and saving (http://www.creditunion.coop/pre_k/index.html).
- University of Nevada Cooperative Extension has two resources: Money Sense for your Children (http://www.unce.unr.edu/programs/sites/moneysense/ and Money on the Bookshelf: A Family Financial Literacy Program (http://www.unce.unr.edu/programs/sites/moneybookshelf/).
In addition to these resources, it is worth mentioning the recent release from Sesame Workshop, in partnership with PNC bank's Grow Up Great initiative, For Me, for You, for Later: First Steps to Spending, Sharing and Saving. This free kit includes an activity book, a parent guide, saving jar labels and a DVD featuring Elmo and other Sesame Street characters discussing the basics of spending, sharing and saving.
With many new studies and materials coming out each month, expect another blog post covering more financial education resources for children!