How many of us look back on our childhood and wish we would’ve been taught more about money? A lot of people graduate from college without any idea how to manage their money or balance their bank account. Maybe you were one of them. So when is the best time to begin to teach your children about money? And how do you even begin?
Teaching Kids About Money: An Age-by-Age Guide was written by Anna Attkisson for Parents Magazine. She begins her article by quoting Jayne A Pearl (Amherst MA based author of Kids and Money: Giving Them the Savvy to Succeed Financially) “It’s actually easy to teach kids about money. Turn your day-to-day activities into learning experiences” and teachable moments. “Trips to the bank, store, or the ATM machine, for instance, can be a perfect opening for a discussion about your values and how you use money. When children are very young, you can work money concepts into your child’s imaginary games, like playing pretend store or restaurant.”
Here are some fun, simple ways to introduce your Preschooler to money.
Ages 2 and 3
“A 2- or 3-year-old faced with a choice between a penny, dime, and nickel will almost always choose the nickel because of its size,” says Dorothy Singer, Ed.D., a senior research scientist at Yale University in New Haven, CT. But while very young children won’t fully understand the value of money, they can begin to learn the names of coins.
• One way to do this is to play the coin identification game. You and your child can trace around the outside of various coins and color in the shapes. Then invite your child to match the coin to the image while discussing each one’s name. (Note: Toddlers may try to swallow coins, so always provide close supervision.)
• Young kids love to play store, but an imaginary shop in the living room is more than just a fun way for your child to exercise his imagination. By exchanging play money for goods, your child begins to understand the basics of commerce, says Dr. Singer. Use cereal boxes, fruit, sponges, or paper towels as store items. Together, make pretend money and shop till you drop.
Ages 4 and 5
• Before heading to the supermarket, ask your preschooler to help you clip coupons. (Don’t forget to use safety scissors.) When you’re at the store, hand her the coupons and ask her to keep an eye out for the products. This will make her feel like she’s helping, and it’s an easy and fun way to talk about saving money, says Neale S. Godfrey, chairwoman and founder of the Children’s Financial Network in Chester, NJ.
• Most preschoolers would rather play imaginary restaurant at home than go out for dinner. It playfully promotes a variety of skills, such as setting the table, learning good manners, and making change. “Many 4-year-olds have to be reminded after the pretend meal that they have to pay the bill,” says Dr. Singer, “but once they understand the concept, they get very excited about paying with pretend money or making change as the cashier.”
Beth Kobliner, is the author of the New York Times bestseller Get a Financial Life, and a member of the President’s Advisory Council on Financial Capability and she offers age-appropriate money lessons for children. She says children as young as three years old can grasp financial concepts like saving and spending and shares a report by researchers at the University of Cambridge that reveals that kids’ money habits are formed by age 7.
Her suggestions for children 3-5 years old:
The Lesson: You may have to wait to buy something you want.
“This is a hard concept for people to learn of all ages,” says Kobliner. However, the ability to delay gratification can also predict how successful one will be as a grown-up. Kids at this age need to learn that if they really want something, they should wait and save to buy it.
Money lessons at this age set the tone for later on. “You really can’t start too early,” says Kobliner. Speaking of her own family, she says, “When we go into a store, if I say, ‘We don’t have money for this,’ they’re smart — they know we have credit cards,” So, she would say, “We’re here to buy a gift for X, and we’re not going to buy anything for you, because we’re not here for that.” Kids then quickly learn that going into a store doesn’t always mean you’ll buy something.
Activities for Ages 3 To 5
- When your child is waiting in line, say, to go on the swings, discuss how important it is to learn to wait for what he or she wants.
- Create three jars – each labeled “Saving,” “Spending” or “Sharing.” Every time your child receives money, whether an allowance for doing chores or from a birthday, divide the money among the jars. Have him or her use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used as a donation. The saving jar should be for more expensive items.
Dave Ramsey is well known in the Christian community for his financial advice and has helped many get – and stay – out of debt. He recommends using a clear jar to save money. “The piggy bank is a great idea, but it doesn’t give kids any visual. When you use a clear jar, they see the money growing. Yesterday, they had a dollar bill and five dimes. Today, they have a dollar bill, five dimes and a quarter! Talk through this with them and make a big deal about it!”
- Have your child set a goal, such as to buy a toy. Make sure it’s not so pricey that they won’t be able to afford it for months. “Then it just gets frustrating, and it gets hard for them to wrap their head around. It’s really more about her being cognizant that she’s saving for a goal than, ‘Oh, I really need her to scrape together those $10 to buy the tutu.’ You want to set them up for success,” says Kobliner. If your child does have an expensive goal, come up with a matching program to help her reach it in a reasonable timeframe. (Kobliner says that while an allowance is a personal choice for every family, at this age, a small allowance could help a child save for these goals.)
Every time your child adds money to the savings jar, help her count up how much she has, talk with her about how much she needs to reach her goal, and when she will reach it. “All those behaviors are really fun for kids,” says Kobliner. “And it gives them a sense of the importance of waiting and being patient and saving.”
And by showing the kids that stuff costs money, Ramsey feels “You’ve got to do more than just say, “That pack of toy cars costs $5, son.” Help them grab a few dollars out of the jar, take it with them to the store, and physically hand the money to the cashier. This simple action will do more than just a five-minute lecture.