Money is a funny thing. It’s sort of a taboo subject that some parents gloss over, choosing to spend more time on table manners and teeth brushing instead. But teaching kids about money early on—where it comes from, how we spend it, and why it’s important to save—can set children up for a lifetime of fiscal success.
Plus, it’s an easy topic to bring up in everyday situations, whether you’re at the grocery store, playing counting games, or finding loose change in pockets or underneath the couch. Use money to practice math, set goals, and introduce the concept of charity. The more you talk about this subject, the easier it will be for your little one to grasp the true meaning behind those dollars and cents.
Here are six important money concepts to discuss with your preschooler and the lessons he’ll learn from each one.
1. Coins and bills Place a variety of coins (coins are a choking hazard, so close supervision is a must) and paper bills on a table so your child can see what they look like. Let him group the denominations into piles: $1 bills here; $5 bills over there; nickels in this pile. Tell your older preschooler that two nickels equal one dime, and four quarters is the same as a dollar bill. Let your tot become familiar with money by having him receive and name the change you get at the store.
Lesson learned: Each coin and bill has a distinct shape, color and design, and its own worth. And while those nickels are bigger in size, dimes have more value.
2. Banks keep money safe Your child may seem puzzled by the ATM—it’s always spitting out money, so there must be more if you need it, right? But the idea to drive home here is that the bills coming out of the machine were put in the bank by you in the first place, for safekeeping. Take your kids to your bank and let them stand by as you enter your secret code and take out your own money.
Lesson learned: The bank is a smart—and safe—spot to store your money, not a place with an unlimited supply.
3. Work = money From age three, kids understand that Mom and Dad go to work most days to earn money to pay for groceries, clothes, activities, and vacations. Of course, you don’t have to reveal exactly what you make, but you can say it’s enough to take care of the family’s wants and needs.
Lesson learned: Money for everyday items comes from the hard work parents put in at their jobs. Your preschooler can also earn a little money for herself by helping you with chores around the house (start with a quarter for each task).
4. Needs vs. wants Talk with your preschool child about the things that are necessary to live comfortably, including shelter, food, and clothing. These needs come first and must be paid for with the money earned. Once necessities are taken care of, the items you want can sometimes come next. You can tell your child that these wants (a new toy, a trip to the zoo) aren’t necessary to live but they make life a lot more fun.
Lesson learned: This is budgeting 101. Mommy and Daddy have a set amount of money that pays for “needs” and, occasionally, for “wants.”
5. Save for a rainy day Putting money in a jar is a good way to teach the value of working toward a goal, especially if it’s something special (a coveted doll or a new trike). Even a two-year-old can drop the coins in and listen to them plink. And watching the money pile up until there’s enough to buy what you want is kind of exciting!
Lesson learned: Patience and delayed gratification are closely tied to the practice of saving money (though it takes time for the preschool set to grasp these ideas).
6. The gift of giving Not every penny you have must be spent or saved. Donating money to a charity is akin to teaching your two-year-old how to share. Talk with older preschoolers about helping those less fortunate and find some organizations where your gift of money can go, including the offering plate at a place of worship, a neighborhood food pantry, or a homeless shelter.
Lesson learned: You’re teaching empathy here. And by sharing what you can spare, your child also learns generosity and kindness toward others.