We all want our children to grow into proper, independent and successful adults, right? A huge part of that is money management. And, learning to manage money comes with a host of lessons about life. When applied with wisdom and foresight, choices about money can determine the type of lifestyle that one gets to live. While we don’t want to put the weight of the world on the shoulders of our young ones, we can teach them simple lessons about money management early in life.
In this article, we’ll give ideas to teach preschoolers about money management, and its importance.
1) Teach preschoolers to count, so they understand quantity, and the accumulation of money
This is very obvious, but it’s an important first step. Before telling children, “we can’t afford that,” when they ask for a toy or ice cream, they need to understand the concept of how money is accumulated. To do that, they need to know the difference of ‘small’ and ‘big,’ of course, and how that relates to quantity.
At very young ages, they may not yet know how to count to 100, let alone 50 or 25. These types of numbers help a lot when showing children the differences between ‘more’ and ‘less.’
After they learn their basic size differences, and their numbers, you can begin to show them coins. While we often don’t pay for things with cash these days, these are great visual manipulatives to help preschoolers understand the value of money.
If they can’t multiply in 5s and 25s, it’s ok. Show them that they have 5 nickels. Or 10 quarters. And, obviously, they’ll see that 10 is more than 5. They can gather coins as individual objects, to see that physically, their quantity can grow. Feel free to use fake coins, or paper coins at this stage. And, please watch out for choking hazards!
When they get better at counting, and enter the world of basic multiplication, you can start showing them that each of these coins is worth something different. So, collecting 5 dimes is not as much as collecting 2 loonies or toonies.
Now, of course, in Canada and America at least, 5 cents is going to seem like it’s worth more than 10 cents, because of its diameter being larger. So, that will take some explaining. But other than that, the children will be able to see how the size of coins, and their different designs, can translate into more or less value.
2) Teach preschoolers how to store money safely, to emphasize its value
When children are 3, 4 or 5 years old, putting money in a virtual bank account may not help to ingrain the concept of money that well. They probably need visuals. That’s why cash, coins and piggy banks are useful at this stage.
Of course you could use the age-old, classic piggy bank to store coins that children collect. And that’s fine. However, it’s also helpful if the children can see their collection grow. A transparent container of some sort is great for this (be careful with glass though, it can break). If this money container can open-and-close, they’ll learn how to add and take from it too. Though, learning to withhold desires for a long-term goal, such as with a breakable piggy bank, is also an ok lesson.
The point here is that the children understand these coins and cash notes are not for playing, and definitely should not be lost. They are objects with value, and they need to be stored safely. They are part of planning for the future.
3) Teach preschoolers about money management with simple-to-understand budgeting concepts
Saving money is great. But in real life, it can’t all be saved, and it can’t all go to one purpose. So, in a way, a savings goal to buy one thing (like an expensive toy), isn’t the best way to mirror what life is going to be like down the road.
All financial experts will tell you to have a categorized budget, and to stick to it. Setting aside ratios of money for certain uses is the foundation of learning to build wealth. Teach preschoolers about money management by setting a principle of how to divide their money, for separate goals and uses.
Using the above concept of a transparent container to keep money they’ve collected (by work or allowance), try this: having separate jars. Each jar can collect for the budget category the preschooler learns about.
We won’t give you the ratios we think are right, because they can be based on individual values you may want to instil in your children. But let’s use one, random example. What about:
25% goes to savings
25% is invested
10% is given to charity
40% can be used right away
The ratios can also change, or be gradually introduced, as the little tot starts to understand more about money, and its function. A 3 year old may not fully understand how to divide, mathematically, yet. So ratios like this may be a bit much at that age. It’s ok to introduce these concepts incrementally, and when your child is ready.
4) Teach preschoolers about money by letting them pay for some things – from their own money and yours
Kids in early childhood can’t watch you pay electricity bills online with much meaning. And, they certainly can’t understand your bank statements yet. So, it will be important to show them the function of money when you have the opportunity to do so. And on this point, be prepared: we’re about to bring up the use of cash, not vague bank cards, which are basically ‘magic pieces of plastic’ to children this young.
When you are at the grocery store, or a department store, firstly, show children that we can’t leave with any merchandise without paying for it. Even if all you have on you is a credit card to tap at the checkout, still get the kids to do that motion, so they understand the concept of paying for things, in order to keep and enjoy them.
But, even better, use those coins they’ve been storing up, to let them pay for their candy or toys. If it’s a necessity purchase, which parents normally buy for kids, let them hand your cash to the cash register, and see how they get change in return. What a great way to show them that different monies have different values! And, that their money is reduced when they buy something.
5) Teach preschoolers about money with ‘buy and sell’ games
What better way to learn than through play! There are so many games you can play to teach children about money. At the most basic level, they can try to identify the names of coins, or their values, and receive a ‘yay!’ from you when they get it right.
At the preschool age, you can also play ‘store’ or ‘restaurant’ at home. You don’t even need a toy cash register to do this. A calculator, or a totally imaginary one works too! You can take turns pretending to buy toys, punching their numerical values into the register, and letting them ‘go home’ with their items.
You can also play ‘restaurant.’ Have them pretend to receive and pay for a ‘delivery’ of food. They can also ‘pay’ the ‘waiter’ at the end of the meal, and leave a tip, too! Fake money, or money they crafted themselves, is helpful for this game.
There are also crafts and activities you can do with kids, to help them learn about money. They come with related subjects, too. For example, learning the letters that spell their denomination amounts, the science of their weights, lessons on addition and subtraction, and more. Below is a list of money games to play with preschool children (these are great for daycares and preschool lessons too!):
6) Teach preschoolers about money by showing them it takes work to have it
At a certain point, a child who practices the above habits will learn that money doesn’t grow on trees. If they are saving their money, they will also see that getting things they want takes time. They have to wait. And they have to work to make that waiting period as short as possible.
Actually, learning to wait, and to have self-control, is really good for kids, as the famous marshmallow test has shown us. Delayed gratification helps kids grow up with strong personalities, to be able to achieve goals. It shows how decisions today can affect them later.
While the debate about whether or not kids should get paid to do chores is a big one, we can say this: working for money, even if only a little bit, can instill positive lessons in preschoolers.
One balanced way to do this is to identify what must be done, as part of a child’s human responsibility (like taking dishes to the sink, or hanging up their jacket). Then, distinguish the acts that are voluntary, that result in earning money. Maybe the kiddos can collect bottles to get the deposits back. Maybe they can do a chore that wasn’t expected of them, in exchange for money.
As parents, it’s up to your discretion how you’d want to handle what gets dubbed ‘paid work’ and what tasks are just ‘part of life.’
Then comes the waiting. It’s good to let kids save, slowly, for a toy they really want, or whatever it is. They should then come to understand that wanting something and needing something are two different things. So, during the waiting period, remind them to be thankful for the food on the table, the house they live in, and the clothes that you bought for them. Be sure to emphasize why you’re not buying this object for them, for no reason other than they exist!
7) Model appropriate money sense around children, to teach them that everyone is accountable to money
Of course, children are watching you. They pick up on everything you do and say. And, they can see when you are impulse-buying things, out of a spur of emotion. It is common sense that as adults, we need to model the behaviours we want our kids to develop. Money is no exception.
On the one hand, this is about how you spend money on yourself, around the kids. But it’s also about what the kids are privileged to have, when they don’t necessarily deserve it.
Are we saying you should never buy children what they want, and only buy what they need? No! Absolutely not. Sometimes, the occasion calls for reasonable splurging. Maybe one parent just got home from a long trip, and you’ve decided to get ice cream to celebrate. Birthdays and holidays also count for getting gifts and ‘wants.’
What we are saying is that there should be limits to how much of those ‘wants’ a child gets, without the proper understanding of what went into earning the money that paid for it. The last thing you want is a sense of entitlement, or a complete misunderstanding of boundaries around money.
On that note, you want to be realistic, and consistent with money around your children. If you are in a financial ‘boom’ with regards to your household economics, that does not mean it’s time to go buy toys and spoil children. If you are in a ‘bust,’ that also should not mean you can’t afford to let your kid collect their dimes and nickels, and watch them grow their piggy banks.
If your house goes through cyclical booms and busts (especially patterned ones that can be avoided), that should not affect how a child is learning about proper money habits. Teach them to save, by saving yourself. Plan for the future in a big way, while they plan for it in a small way.
8) Don’t teach kids about money by making them feel burdened about issues they can’t control
We’ve quoted Dr. Phil on this before, and we’ll do it again. He’s got two main rules for parenting that should not be broken. With regards to kids, he says:
- Do not burden them with situations they cannot control.
- Do not ask them to deal with adult issues.
When parents worry about money in front of kids, or make them feel like ‘doom’ is coming because of money, it puts pressure on their little minds, that they don’t need, and that won’t help them to be concerned about.
This is not the same as allowing children to fully understand that we can’t always have what we want. Or, that mom and dad need to work to pay for things. It’s also not about being positively open with children about household money matters (like having a budget for certain things, or paying bills). There is a healthy way, and an unhealthy way, to talk about money with kids.
Your behaviour about money should not cause worry, and not stem from worry. If there are ups-and-downs with money in your household, and more especially if this is a cyclical problem, the kids don’t really need to be fearsome with you.
To conclude: teaching preschoolers to be responsible with money starts with parenting rules
As we’ve seen above, all the ways to teach preschoolers about money management have to do with some sort of lesson given by parents. It’s a lesson that needs to be reinforced, and stuck-to, as well. It also means modelling responsible money management with kids, at the adult-level.
At preschool and daycare, money can still be taught. But, usually, those are classroom projects. Such as a fundraising drive, or a mathematics lesson.
In time, these lessons can build up into more serious ways of handling money. Eventually, the things that kids buy will be more and more important. They’ll fall more on the side of needs rather than wants before you know it! Teaching them about the importance of smart money decisions in early childhood can help prevent the shock of money problems later in life. And, hopefully, it will result in more money rewards, instead.