Money is a “best-of-times-worst-of-times” topic. As an adult, having money is great. Spending it is fun. Saving it can even be exciting.
But not having enough of it or it all going to absolute necessities can be stressful and disheartening.
Many adults probably wish they’d had more guidance on how to manage their money earlier in life. The great news is that it’s never too early to introduce your child to the concept of money. If you’re the parent of a preschooler, here are five ways to teach your preschooler about money.
1. Practice Counting & Exchanging
According to one study, people develop basic financial behaviors by the time they are 7 years old.
Don’t freak out. By “basic financial behaviors,” they mean the practices of counting and exchanging.
For counting exercises, count anything and everything and make sure to include play coins and paper money. For older preschool kids, work on identifying and counting different coin values.
Exchanging exercises are a little more difficult but very important. “Exchange” is the idea that something must be given up to make a purchase and is gone for good once it’s spent. So play games where you fake shop around the house or go grocery shopping in the pantry. Just like in real life, have them hand over money at the register before they walk out of the “store.” You can teach them about the concept of exchange in everyday situations, too. Use cash in front of them when you’re shopping. If you’re using a credit or debit card, show them your receipt so they see a certain amount of money was exchanged to bring home the things you bought.
2. Practice Saving
The concept that things cost money should be quickly followed by the idea that money also can (and should) be saved.
The best way to do that is to talk positively about saving. Tell your kids occasionally that you decided not to spend money on something so you could use it for something more important. And each time your child chooses to save instead of spend, pour liberal amounts of praise on their head.
Don’t get too lofty too fast with the concept — help them save money for a toy they’d like to buy instead of telling them how important it is to save for something vague like “the future.” An easy way to get kids onboard with saving money is to use a clear jar instead of a piggy bank for their money. It sounds too simple to be true, but the pain of watching their once healthy account cut down to nothing can be painful enough to make them second guess their purchase.
Terry Clark-Jones at Michigan State University Extension suggests getting three containers that say “SPEND,” “SAVE,” and “GIVE.” That way, kids can better visualize how much money they have and what it is being used for.
3. Share the Value of Giving
Speaking of giving, make sure generosity is part of the money conversations you have with your children. As human beings, we do not start our lives thinking about other people. Use conversations about money as a way to talk about gratitude and thinking about others. Instilling financial generosity in kids early will help combat against our human tendency to hoard and give into greed.
If you decide to use a “GIVE” jar with your kids, help them decide how they’ll use that money. Let them know they could give to a charity or directly to another person. Don’t decide for them, though. If they give to something they really care about, they’ll be excited about the process.
4. Create Opportunities to Earn Money
Especially for older kids, earning an allowance or doing extra chores for extra money gives you and your child a great opportunity to talk about work, money, and “doing your part” within a family. Check out our article on chores, which includes advice on what chores should be paid and what chores shouldn’t.
5. Model Good Behavior
Here we are again … reminding you that one of the best ways to teach your child anything is to show them by example.
But it’s true! Parents are who children look to for just about everything. (We don’t make the rules …) Perfection is certainly not the expectation, but do your best to practice what you preach when it comes to money.
Consistently showing your child what good spending habits look like will help guide them as they learn more about money and financial responsibility.
Without oversharing, be honest about how much things can cost sometimes and the sacrifices you have to make in order to pay for the important things, such as rent, food, insurance, and gas.
Make sure to celebrate with your kids when saving money pays off, too! When you FINALLY have enough to go on vacation, make sure your kids know you worked hard, saved for the trip, and the money didn’t appear out of thin air.
Money may feel like a topic that’s too complicated for kids, but we’re not asking them to invest in the stock market. Start small and involve your kids more and more in talks about money as they grow. You may be surprised at how much the consistent, tiny conversations you have end up affecting their lives.