Children learn more about finances from their parents than any other source, previous research has shown. The process through which parents impart this knowledge onto their children is known as "financial socialization."
Much of the existing literature on financial socialization focuses on two things: the example parents set for their children, and what moms and dads directly teach their kids about money. However, research often overlooks a third important piece: giving kids hands-on practice managing money, says a new paper authored by University of Arizona doctoral student Ashley LeBaron.
The paper "Practice Makes Perfect: Experiential Learning as a Method of Financial Socialization," published in the Journal of Family Issues, explores the importance of parents giving children real-world experience with money to help prepare them financially for adulthood. The study suggests that future research should consider this sort of experiential learning a third key method of financial socialization.
Parents can give their kids practice with money in a variety of ways. They might give them a regular allowance, pay them for tasks that go above and beyond their normal chores, reward good grades with cash, or encourage them to save for special purchases or charitable donations. The specifics don't really matter, nor does the amount of money, which may vary based on a family's financial situation, LeBaron said.