Teaching Kids About Money
This is the age of play and rapid learning from observation. That means it’s time to have fun teaching your kids about money. You’re setting the stage for how your kids will relate to money, so be thoughtful about how you interact with your children and others on financial topics. Teach your children wisely, but most of all, have fun learning together.
Key Money Basics for Ages 3-4
- Explain that money is earned by working and that it’s used to buy things.
- Try to use real money if you’re shopping with your kids.
- Teach the difference between nickels, dimes, quarters, and various bills.
- Work on counting, basic math, and relational money concepts (i.e., five nickels equal a quarter).
- Consider allowing online educational resources and apps for kids to introduce math, number, and financial concepts.
Promote Learning Through Play
The concept of money is still obscure at this age, but you can introduce the basics and explain how it’s used. Playing with money is a natural way to teach early math skills. Be sure to make learning fun and truly embrace the age of play. Here are a few fun play activities to reinforce these goals:
- Stack coins.
- Count and roll coins in paper wrappers to take to the bank together.
- Talk to your children about what’s shown on each coin and bill, and the difference between heads versus tails.
- Play store or use a toy cash register.
- Allow access to carefully selected online educational games, apps, and other tech resources that are age-appropriate. Make sure in-game purchasing is turned off, though!
Talk about Money
Going shopping is one of the best ways to explain how money works. It’s an ideal time to discuss the value of money, demonstrate sensible spending, and encourage your kids to practice what they’ve learned by making small purchases.
- The grocery store is a perfect environment to talk about how you make purchase decisions. Talk about prices, nutrition, sales, and coupons.
- Children love to make decisions, so let them make one or two small purchase decisions a week, such as a piece of candy or a small toy. Set parameters before you go to the store, including what they’re allowed to choose, and how much they can spend.
- Remember, one of the best ways for your child to learn about money is seeing you pay with real dollar bills and coins.
- If cash isn’t practical, talk about the different ways to pay for things, including cash, cards, and phones. Explain that they all look different but work the same way, using money you’ve earned from working.
Make Savings Fun
Begin laying the foundation for good saving habits now in fun and rewarding ways. It’s one thing to talk about saving and growth, but the best way to explain it is by seeing at this age.
- A savings jar remains the best way to demonstrate the concept of accumulating savings for the future. Collect loose change in see-through jars, ideally ones that you can decorate together. Celebrate with your children as the amount steadily grows.
- Allow your kids to take a small amount from the jar once a week (maybe $1) for a special purchase. The primary goal is to watch it grow, so don’t let them take so much out that the jar dwindles.
Visit the Bank
The most important objective at this age is for your kids to experience the bank environment and learn that it’s a safe place that holds your money.
- Take your children with you when you go to the bank so that they can observe what happens there.
- Explain that the bank keeps your money safe until you need it. If you’ve created a jar for small change, you can explain that the bank is like the jar – just bigger.
- Get coin wrappers and help your kids roll coins as part of their play learning, counting, and saving exercises.
- A common misconception for youngsters is that an ATM prints and gives away money for free, as often as you need it. Explain that the money you withdraw is money you’ve earned from your job, and that there’s a limited amount of cash available.
Set a Good Example from the Start
Your kids are young but they’re old enough to observe and absorb your behavior towards money. Be a good role model; the examples you set will be key to how your kids relate to money in the future.
- Ask yourself if you’re setting a good financial example by thinking about:
- How you manage your money.
- How you talk about money with your kids.
- How you interact with family members and friends on money topics.
- What you say about work.
- Your own money personality.
- Whatever your personal financial perspective is, the strongest piece of advice is to avoid extremes. Don’t be too stringent or too free with your spending, as both could have a lasting impact upon your children’s relationship with money.
Cash Is Better Than Cashless
Young children can’t conceptualize money. Cashless transactions make it hard for your kids to understand money and how it works. That’s why using actual coins and bills remains the best way to teach financial literacy in early childhood. That said, modern life is full of electronic money transactions.
- Explain that using a credit or debit card or paying with your phone means you don’t have to carry your coin jar with you.
- Apps, online games, and other digital resources can help introduce the concept of virtual finances in a fun way. Be sure that games are age-appropriate and ensure that in-game or additional purchases are blocked.