MADISON, Wis. (6/3/09)--Research into how young children learn indicates that they are capable of acquiring basic money concepts long before they enter school. Through social interaction and observation, preschoolers can begin to comprehend such abstractions as the purpose of money. That’s one of the key conclusions of phase one of the University of Wisconsin (UW)-Madison study into preschool financial literacy. The Credit Union National Association (CUNA) developed the concept and offered advice for the study, and a grant from the National Credit Union Foundation funded the research. Parents who guide their preschoolers in learning about money and saving obviously won’t create toddler Warren Buffets. “However, it is generally recognized that very young children can be taught about the basic benefits and tools of sharing, savings, and purchase that will support good financial habits and practices as children, leading to better managed financial lives as adult, independent spenders and savers,” the report said. In praising the study, CUNA President/CEO Dan Mica pointed out that full family membership policies put credit unions in a unique position to capitalize on this insight. “Four years ago, we created our Thrive by 5 teaching resource for parents on the hunch that it could help them explain and model smart spending and saving to their children from a very early age. This report says that we were right to push the financial literacy envelope below kindergarten," Mica said. “As the study moves forward, I expect that we’ll find out exactly what kinds of activities work best with this age group. With that knowledge we can improve Thrive by 5 if necessary, and give credit unions a tool for parents to better encourage healthy attitudes about money in their children before they begin school. The long-term result will be more financially secure adult members,” Mica added. The research was led by Karen C. Holden, Ph.D., professor in the UW’s Department of Consumer Science, and Charles W. Kalish, Ph.D., chair of the UW’s Department of Educational Psychology, with assistance from graduate students Laura Scheinholz, Deanna Dietrich, and Beatriz Novak. In the first phase of the planned three-year study, they reviewed dozens of previously unconnected studies of the development of economic concepts in early childhood. “The literature in cognitive development provides support for the proposition that financial literacy education is appropriate for young (preschool-aged) children. Children are already engaged in thinking about, and acting within, a financial environment. The conceptual tools they develop in their everyday lives will be the starting point for any formal educational efforts,” they concluded. The research team also examined 28 U.S. and 45 international programs to identify “the key financial concepts that are targeted in the financial education programs aimed at young children.” It found little evidence that these programs considered “the cognitive ability of children to grasp those concepts.” Furthermore, the researchers said, “There has been virtually no rigorous evaluation of these programs.” Future phases of the research will attempt to rectify these shortcomings by determining the most age-appropriate educational outcomes for preschool financial education and testing which methods and activities work best in preschool classrooms and in the home, starting with CUNA’s Thrive by 5. For the executive summary and the full research report, use the link.