Ages 5-7

Teaching Financial Literacy

By this age, your kids should understand that you buy things with money you earn, but they’re still figuring out the bigger picture of how money really works. The good news is that they’re eager to learn, especially from you. One of the biggest steps in financial education is to introduce an allowance at this age. Take advantage of the opportunities to share, teach, and experience together.

Key Money Basics for Ages 5-7

  • Reinforce that money is earned by working and is used to buy things.
  • Practice counting and exchanging money at home during play.
  • Cash remains key for financial learning at this age, so try to use cash if you’re out shopping with your kids.
  • Use age-appropriate online resources, games, and apps to reinforce number, math, and financial concepts, and to introduce the realm of digital finances.


Boost Math & Money Skills

As math skills continue to develop, toys, games and play experiences with money help expand kids’ knowledge. A few fun activities include:

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  • Play board games like ‘Monopoly Junior’ and ‘The Allowance Game.’
  • Encourage imaginative play such as pretend store with a toy cash register, play coins, and plastic cards.
  • Count and roll coins together in paper wrappers and allow your child to hand them over the counter next time you visit the bank.
  • Decorate a clear jar as a savings bank and let it fill over time with spare change. This simple exercise remains an important first step in demonstrating the concept of savings.
  • Allow access to online apps and resources that encourage financial learning. Make sure in-game purchases are turned off!

Introduce A Small Allowance

By age 6 or 7, kids are ready to receive an allowance. (Tying an allowance to chores is a personal decision.) Associate the allowance with financial decisions and purchase responsibilities.

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  • The amount should be small, consistent, and paid weekly in cash.
  • Think of purchases your kids are ready to make with some level of financial freedom. These are typically small, inexpensive items. Tie their allowance to these purchase responsibilities.
  • The allowance should be adequate to cover one or two purchases per week. This helps to teach your kids that they can’t buy something everyday, and that they have to make decisions throughout the week.
  • Supervise purchase decisions.
  • Stand firm and say “No” if your kids run out of money. If something is really important and their allowance isn’t enough, you can encourage small household jobs to earn more.
  • Be sure to review the allowance every year, perhaps around your child’s birthday. Both the amount of the allowance and purchase responsibilities should modestly increase each year.

Open the Door to Purchase Decisions

It’s time to start encouraging small purchases with supervision. Help your kids learn how to make smart decisions and how to pay for things. Be sure to set limits and establish purchase responsibilities that align with their weekly allowance amount.

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  • Encourage your kids to pay the cashier at the store. Supervise as they count out money and receive change.
  • Set limits on what your children can purchase, including the dollar amount, frequency, and types of items. It’s best to set these limits before you leave home or enter the store.
  • If your kids are receiving an allowance, encourage them to leave some of it at home so that they don’t spend everything at once.
  • Layer in the concept of saving for special purchases like birthday and holiday gifts. A small, personal savings jar is an effective and fun tool.
  • This is an age of rapid and eager learning, so consider the following while shopping:
    • Talk about purchase selections, sharing questions and input.
    • Have your kids help you to comparison shop.
    • Put your kids in charge of the coupons.
    • Allow your kids to pay for small things using cash.
    • When you pay, don’t always use large bills and be sure to count out the cash so that your kids can observe.

Encourage Saving for Small Goals

Your kids are ready to start learning a slightly more complex concept of savings. The notion of long-term savings is still obscure, so start by encouraging your kids to save for shorter-term goals.

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  • Encourage your kids to save a small amount of their allowance each week in their own personal saving jar, saving for goals such as a special toy, or a birthday or holiday gift for someone special.
  • Continue filling a family savings jar or piggy bank, promoting a sense of accomplishment as money accumulates.

Explain Banking Basics

Continue to keep the concept of banking simple, but introduce new concepts beyond the fact that a bank keeps your money safe. Your kids are only a few years away from having their own account, so make sure their experiences are positive ones.

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  • Explain that your paycheck gets deposited at the bank, then you can spend it using cash, cards, or your phone.
  • Visit the bank with your kids, taking the time to go inside to make deposits and withdrawals.
  • Get coin wrappers and have your kids roll coins. They can be exchanged for dollar bills to be added to savings at home, or can be used for special purchases like birthday or holiday gifts.
  • Explain how an ATM allows you to withdraw money that you’ve earned, even when the bank is busy or closed. Youngsters often incorrectly think that ATMs print money and give it away free, as much and as often as you want.

Consider Impressions & Expectations

Kids start becoming cognizant of lifestyle choices at this age. Areas of early focus include choices relating to apparel, toys, and technology. We all want our family to enjoy a comfortable lifestyle, but it’s important to be mindful of the impressions and expectations you create.

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  • Limit your comments about others to positive remarks.
  • Think about your own wants versus needs and how you talk about these.
  • Evaluate your spending choices and think about what your kids are learning from you.
  • Make sure that your words and actions support your individual and family values.
  • Create realistic expectations for your kids on a personal and financial level.

Be Mindful of What You Say & Do

Your kids are young but they understand more adult topics every day. Remember that they’re absorbing everything you say and do. Foster a happy and healthy environment that encourages development of a balanced relationship with money. Continue to set a good example by:

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  • Managing your money wisely.
    • Talking openly about money with your kids.
    • Discussing work in a positive way.
    • Interacting with family members and friends on money topics.
    • Evaluating your own personal money style.
  • However you react and relate to money, always try to avoid extremes. Being too lax or too strict with your spending can have a lasting impact upon your children.

If you’re well-off, think carefully about the wealth effect, including the expectations you’re establishing for your kids and whether they’ll be able to sustain them later in life.

Curiosity About Cash Versus Cashless

Perhaps your child received a gift card, watched you pay with a phone or card at the store or online, or saw you withdraw cash from the ATM: Any of these might spark questions about cash versus cashless payments. Because conceptual thinking has not yet developed, use simple terms and ideas when answering.

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  • Explain that your card or phone makes paying for things easier.
  • Draw a diagram to show your kids how money flows to help them make the link between ‘real’ and ‘invisible’ money:
    • You earn money by working.
    • Your employer deposits your earnings straight into the bank.
    • You choose when to spend it and how much to spend.
    • You also choose how to pay, by using a card, your phone, or cash from the ATM.
  • Explain that using plastic, your phone, or getting money from the ATM doesn’t mean that you can have anything you want, whenever you want. Even though you can’t see it, you’re spending real money that you’ve had to earn and there’s a finite amount available.
  • Expand knowledge of digital finances through age-appropriate, educational online games, apps, and other virtual resources. Be sure to disable additional purchase options first!

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