You may have heard of the Stanford Marshmallow Experiment, a psychology test developed in the 1960s to measure a child’s ability to delay gratification. When I was a kid, my mother once ran her own version of the experiment at our kitchen table: “You can eat this marshmallow now,” she told me, placing a single one in front of me, “or if you wait five minutes and don’t eat it, you can have a second marshmallow when I come back.”
Captivated by the idea of two marshmallows, I waited patiently for five minutes until she came back into the room and then devoured my reward. When my mom performed the same test on my younger sister a few years later, my sister figured out the genius hack of licking the marshmallow and placing it back down, getting a little bit of pleasure while still technically qualifying for her prize.
The marshmallow test isn’t exactly an objective barometer for willpower. In the years since the original Stanford study, other research with more diverse subject pools has found that socioeconomic background also plays a significant role in whether a child will eat that first marshmallow. Running makeshift psychological experiments on your own kids will likely provide more entertainment than actual insight.
Still, the spirit of my mother’s test was on the right track: Tolerance for delayed gratification is intricately tied to how well people manage their money, and it’s a concept that provides the groundwork for a lifetime of healthy financial behaviors. Below, experts in financial education offer some more effective techniques for raising a child to be good at money.
“When you’re giving a child money, you can’t then lament that they just spent all the money. Of course they did; they have no impulse control.”
All of them agreed unanimously on one thing: There is no “right age” to start these lessons. But the earlier you begin introducing financial concepts in a tangible, age-appropriate way, the better. Here are some ways how.
1. Hands-on experience is required.
“Parents are the No.1 source of a child’s financial education,” says Ashley LeBaron, a professor of family science at the University of Arizona who studies family finance.
Recently, LeBaron co-authored a research paper titled “Practice Makes Perfect: Experiential Learning as a Method of FinancialSocialization” that was published in the Journal of Family Issues. Most research on financial socialization, or the study of how we develop attitudes and practices around personal finance, has focused on two methods for teaching kids how to handle money: the example parents set and the conversations they have with their children. But in her paper, LeBaron focused on hands-on learning as a third, equally effective method.
“We realized the importance of getting money into kids’ hands early on,” LeBaron says, and “letting them practice managing their own money, make mistakes, learn from those mistakes, and form habits while they’re still at home before they’re thrust out into the world.”
2. Give your child a structured allowance.
One way to provide that hands-on experience is through an allowance, says Brad Klontz, a financial psychologist and professor at Creighton University. Go into the process with an open mind, and don’t get frustrated off the bat by what your child does with the money.
“Start with the end in mind in terms of how you want your child to operate with money as an adult,” Klontz advises. “When you’re giving a child money, you can’t then lament that they just spent all the money. Of course they did; they have no impulse control. They don’t know how to delay gratification. You need to teach them to do that.”
In creating these teachable moments, parents must first identify their own core values, says Klontz, who recommends structuring the allowance with strings attached. This doesn’t mean tying it to chores; Klontz notes that chores are an expected part of being a family member, and linking allowance to specific tasks sets parents up for failure when their children retort “Then don’t give me the money” as an excuse to shirk their responsibilities or, when they’re older, go out and secure a part-time job to underwrite their spending.
Instead, Klontz recommends splitting a weekly allowance in accordance with your family values. For example, if your child gets $3 a week, then one dollar goes to spending, one dollar to savings, and one dollar to charity. At the end of the year, you can present options for charitable giving to your child and allow them to select where the contribution will go. It also provides an opportunity to talk about how giving makes you feel and instills a sense of generosity from a young age.
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