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My child and money – what should I expect?

Money is quite an abstract concept, and one that most young children don’t understand. To your child, the ATM holds an endless supply of cash, and their needs and wants are very much the same thing – regardless of your budget! However, the good news is that over time, your child will begin to understand the concept of money a little more. Here are some money milestones to look out for:

At two years old:
Aside from understanding what money means in literal, concrete terms – notes and coins – your two year old has very little concept of what money is, and what it’s used for. Your child is as likely to play with money as he or she is to save it in a piggy bank. While your child may enjoy learning the names of coins and notes, and even playing with them (whether it’s sticking them in a toy cash register or making coin towers) coins are some of the biggest choking hazards around, and you need to keep them far away from an unsupervised two year old.

At three years old:
By three, depending on how much exposure they have had to money, some children can tell the various coins from each other. Some will even understand that money has value, and that it can buy things that they want. However, most do not understand that money is used to pay for something – so they are usually a little confused when the cashier does not give them their money back after paying for something!

At four years old:
By four, your child will have realised that when he or she buys something, they are trading the money they’ve paid for the item they’ve bought. However, your child still does not grasp the value of money. Your child may start planning to visit Disney land with his or her pocket money, for instance. Most do understand, on some level, that there are different denominations of money, and that some people have more than others. They also understand that money comes from working, and that people who have more can help those who don’t.

At five years old:
Five year olds have a much better handle on money. They understand that having more money will mean they can buy the things they want. However, at this point, your child is still more interested in what he or she has now, and if given money, will be more likely to spend it on something they want now – like sweets – than saving their money for a bigger purchase in future.

At six years old:
Your six year old has grasped the idea of saving up for things, but he or she probably doesn’t have the patience to wait. Your child is more likely to save small amounts for a short period of time, and then buy something that offers immediate gratification at this point.
Children at this age are learning to count their money, and they can differentiate between things they want, and those they need, to a degree.

At seven years old:
Your seven year old will have a fairly good grasp on the value of money, including the difference between denominations. He or she will start to see the value of saving small amounts of money, and has probably become quite adept at counting it.

At eight years old:
By this age, your child will be very aware of the value of money, and is unlikely to get excited about small amounts. He or she will also see he value of saving, and an improved handle on delayed gratification means that he or she is willing to save small amounts, and wait until he or she can afford something that your child really wants.

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