Cognitive Development and Children’s Understanding of Personal Finance

Abstract

While a review of financial education programs in the European Union targeted on school-age children and adults concludes " there is only a small degree of dissent about the ideal contents of a fi nancial literacy scheme " (Habschick, Britta, & Evers, 2007 , p. 96), we do not fi nd this same uniformity among the fi nancial literacy edu-cation programs oriented toward the very youngest children. We argue this is because there is little agreement, among those developing fi nancial literacy educa-tion programs, on what underlying concepts should be taught at early ages, and on what concepts and teaching methods are most appropriate. This chapter draws from a review by the authors of fi nancial literacy programs targeted to young (preschool and K-3) children. 1 The key issue addressed in that review is whether program approaches and concepts taught were consist with cur-rent theories about cognitive development and capabilities of the young children they target. To do this, we fi rst developed a set of fundamental fi nancial concepts (available from the authors) that are important to understanding the fi nancial liter-acy concepts met in later grades and to negotiating the fi nancial landscape as adults successfully. In selecting these key concepts, we drew from our own experiences in fi nancial education research and in cognitive development research as well as from sources that describe the foundations of more advanced economic or personal