Teaching kids about money is an essential part of preparing them for adulthood. But learning about money is incomplete without also developing good financial habits and skills. When it comes to learning about money, like with most things in life, practice does help make perfect. And in that sense, learning about money is a lot like learning a new sport.
Why is practice important in teaching kids about money?
Practice helps to build good financial habits
Habits are formed through repeated actions over time. And just like they would need to practise hitting a tennis ball over and over to perfect a stroke, kids need repeated practice managing money to develop their money muscle memory.
When kids are allowed to practice habits like earning, saving, budgeting and smart spending, they start to learn how money works. The more they practice, the better they get at managing their money.
A study published in the Journal of Consumer Psychology1 found that participants who repeatedly practised a behaviour such as saving money were more likely to develop better habits and continue the behaviour in the future.
Practice improves decision-making skills
No one is born with the ability to dunk, and no one is born money-wise. We don’t suddenly wake up one day with the ability to make good financial decisions. It takes hard work, and guidance and requires practice. Every time kids make small money decisions is an opportunity for them to learn. Good decisions lead to good outcomes, and kids learn to repeat such behaviour, such as saving to buy something they have their hearts set on. Poor decisions allow them to learn from their mistakes and alter their behaviour, such as learning from running out of pocket money.
A study published in the Journal of Economic Psychology2 found that participants who received feedback and had the opportunity to practice making financial decisions were better able to make informed choices in the future.
Practice reinforces learning
Watching videos of Usain Bolt breaking the 100m sprint world record won’t make your child run any faster. But following a regular training plan will help reinforce what they’ve learned about form, stride, speed and power.
Learning about money also needs a training plan - one that involves applying concepts your child has learned to real-life situations. Kids need real-life experience when learning to budget, save and spend.
Research3 has shown that students who had hands-on experience with financial concepts in real-life situations had a better understanding of money and showed more positive financial behaviour among participants.
Practice allows for experimentation
There’s a reason why some kids play a certain position in a sport, and some play another. Everyone is different, and kids have different interests and aptitudes and chose sports or positions that best suit their skills.
Similarly, learning about money is not a one-size-fits-all process. Kids have different ways of learning and will develop different strategies and techniques to manage their money. But it is practice that helps them learn to develop their own unique approach to managing their money, and how to make better decisions in different situations.
Like with any learning, kids will make little mistakes. Every missed goal is an opportunity to become a better football player. Even when it comes to money, little slip-ups lead the way to better choices in the future.
Kids can't learn how to swim without getting in the water, they can't learn how to play footy by reading a book, and they certainly can't learn about money without regular practice.
1. Lally, P., van Jaarsveld, C. H., Potts, H. W., & Wardle, J. (2010). How are habits formed: Modelling habit formation in the real world. European Journal of Social Psychology, 40(6), 998-1009. https://doi.org/10.1002/ejsp.674
2. Gathergood, J., Weber, J. G., & Weber, R. A. (2014). The role of advice in shaping retirement savings decisions. Journal of Economic Psychology, 45, 1–9. https://doi.org/10.1016/j.joep.2014.05.003
3. Kang, Y. J., Joo, S., & Grable, J. E. (2020). Experiential learning in financial education: A meta-analysis. Journal of Financial Counseling and Planning, 31(1), 57-73. https://doi.org/10.1891/JFCP-19-00013