Working from home with a child by your side? Here are a few basic money, life, and business lessons you can teach them while you work.

What comes to mind when you hear the word working from home with a kid by your side? Maybe you’re picturing your young child playing in the sandbox at daycare. Now, what comes to mind when you hear the word ‘finance’? Maybe you’re thinking about that time you read that 100-page mortgage document that confused even the smartest version of you.

They’re quite contrasting images and for that reason, these two concepts are not something you usually hear in the same sentence. I mean, how often does your partner say to you: “we should really teach our child about money – even as our kid watches us work”?

Children are impressionable. They learn quickly. They adapt to their environments quickly. Most importantly, they absorb behaviours quickly. So let’s talk about financial behaviour and money habits and why it’s a good idea to start teaching your kids early and that they can learn easily while watching you work from home.

Learning and development patterns in childhood

It all starts with basic human psychology, and in particular, how children learn and develop. Boring? It’s maybe more important than we give it credit for.

A recent study by Cornell University’s Department of Human Development concluded that “babies and children are like little scientists — they gather evidence by observing and experiencing the world.”

“By the time children are in preschool, they already understand a lot about other people’s desires, preferences, beliefs and emotions.”

Cornell University, Department of Human Development.

The researchers in this study are referring to a child’s cognitive developmental ability. Cognitive…what?

Cognitive development is how children perceive internal and external behaviours in relation to information processing, thought processing, memory, problem solving and decision making. “By the time children are in grade school, they already understand a lot about other people’s desires, preferences, beliefs and emotions”. Basically, it means that kids start developing the ability to process information, as rudimentary as it may be, from a very early age — preschool. Hence the expression “kids are like a sponge, they absorb everything”?

Research shows that even young children can ‘habituate’ effective processes and tendencies into their mental repertoire — and interestingly enough — this includes tendencies around money and finance. In other words, when it comes to money or financial literacy and school aged kids — children learn by observing those around them. These people are called influencers.

Who are their influencers?

You might have guessed already that teaching your child about money does not involve giving them a colouring book, or giving them a bunch of coins to play with. In fact, it’s actually simpler than that. Teaching kids at this age about personal finance and sound financial habits is about you. It’s about how you as a parent exposes them to money in everyday life. It’s about how their siblings behave when they get pocket money at home.

Children at this age learn by observing. It’s these daily influencers that have the most impact on their cognitive development. So who are the major influencers in your child’s life, apart from you and your family?

  1. Teachers: The teacher-student relationship is one of the primary influences in cognitive development for young children. Teachers with positive influential relationships with kids encourage and reinforce appropriate self-regulatory behaviours that are important for learning and development.
  2. Peers: Not just your children’s friends, but their parents too. Children under the age of seven, frequently require the assistance of adults to engage in social interaction and this can take many forms.
  3. Media and Advertising: In 1999, a study by Livingstone and Bovill found that 26% of 2–4 year olds and 39% of 5–7 year olds spend on average about two and half hours each day watching TV. That was in 1999, well before YouTube, well before smartphones and tablet devices were so prevalent. 

This creates an interesting dilemma — can you control what your kids are exposed to? Probably not. To an extent, you can control what they see on TV, who they hang out with, or which school they’re enrolled in, but it’s almost impossible to monitor their exposure to external factors on a minute-by-minute basis. Don’t worry, it’s not as bad as it sounds.

In the same study we talked about above, the researchers conducted a series of experiments exploring children’s causal reasoning, Kushnir and Gopnik, two researchers from Cornell University’s Department of Human Development, showed that “children can revise existing beliefs if they get good evidence that contradicts their earlier assumptions”. In essence, what this means generally, and especially in the context of money, is that parents should be looking to set and repeat good financial behaviour from an early age.

How to approach money with your child

As adults, we handle money every day, and believe it or not, your young one is paying attention. They’re learning. They’re forming habits. They’re building financial literacy. We call this financial behaviour. We all have it and build it from a very young age. We might be too young to remember.

Teaching your child about money is not as much about instruction, as it is about participation. As odd as it sounds to expose your child to money, you can involve them actively when you’re doing even what seems like the most mundane things. For example, when checking out at the registers on your weekly household shopping get your child to swipe the credit card or hand over cash. Or, when you’re doing the family budget or paying your bills talk openly about what it means. Or, when you give the elder child pocket money for doing chores around the home, make it a point to praise the hard work and reward. On the surface, it might sound like it makes no difference, but think about what we’ve just learned about cognitive development in young kids and it’s easy to see why repetitive behaviours such as this helps to form good money habits from an early age.

What you can do to influence good financial habits while working from home with a child

In 1960, Stanford University ran a famous study called the “Marshmallow Test” on some 600 kids aged 3 to 6. The idea was mainly psychological in nature, to test on the concepts of ‘self control’ and ‘delayed gratification’. They children in an empty room and placed a marshmallow in front of them and the researchers shard some simple rules with each child:

  1. You can eat the marshmallow right now and receive nothing more; or
  2. You can wait till I come back and you get two marshmallows.

Cruel, right? I mean, the 3 year old version of me would have probably asked for a glass of milk and not looked back. There’s actually a strong everyday financial concept that underlies this test. If you haven’t guessed it already, it’s ‘interest’. Interest works in a very similar way to delayed gratification. You can either spend your money right now, or you can put it in a bank account and get more later.

Of course, it’s important that you build trust with your child before employing this strategy at home. In the “Marshmallow Test” conducted at Stanford University, the researchers established trust with the kids first. Before they started the test, they put the kids in a room with a bell and whenever it was struck the researcher reappeared immediately, reinforcing in the child’s mind that the person was trustworthy. In our case at home, you have likely established trust with your child already, but it is important to note that whatever method you choose, that you follow through on your word.

Here are some simple everyday activities that you could do with your child to teach them about the concept of ‘interest’:

  • When it’s time to pack up their toys, tell them if they put all their toys away immediately, they can have extra time with them tomorrow.
  • When you are out shopping and they want a bar of chocolate, tell them if they wait till tomorrow, they can have that chocolate bar and another small goodie.
  • Give them a 10 cent coin every two days to put into a piggybank and each time they make a deposit, the next day sit next to them and put 5 cent into the piggybank for them.

As your child gets older, you can be a little more advanced. Take our chocolate bar example above — the next day when your child has patiently waited for their bonus goodie, tell them if they can wait another day, they can have the chocolate bar and two small goodies. Nice one, you’ve just taught them about ‘compound’ interest, one of the most powerful concepts in personal finance and banking.

Let them make mistakes

Sometimes, they will choose to have instant gratification and take that bar of chocolate immediately. Buy it for them, but make it a point to show them the next day that they could’ve had that chocolate bar and the bonus goodie, but now they can’t.

It might not be completely obvious, but exposing young children to activities like this is incredibly powerful. It develops their cognitive abilities and sets sound financial behaviors in place that will set them up for the future. And that is an investment worth making – and an investment you can make while working from home with a child.