You can’t wait until your kids are teens to start teaching them about money. Here are some simple tips for teaching young children about money.
Do you think that you shouldn’t bother trying to explain money to small children?
A study found that money habits are set in children by the time they are 7 years old. Much of what they learn is acquired through observation and normal interactions with parents and other adults.
My small girls (ages 4 and 2) love playing shop. They’ll gather little items and toys and practice buying and selling (to me or each other).
Once they “sell” the items, they buy them back and we start all over again! They often play with coins or dollars, but sometimes my 4-year-old will tell me that I need to pay by “card.”
When we go to the store together, she’s very observant and frequently asks me questions about the card machine, cash register, and just about everything else.
Children learn by repetition and playing over and over. Every time we play this game (or go shopping or talk about work and money) she’s learning a little more about it and making new connections in her brain.
Teaching young children about money doesn’t have to be complicated! Here are a few concrete things you can do to help your young children start off on the right path to good money management in later life.
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Teach little kids about money
Here are 6 simple things you can do to teach your little kids about money:
Talk about money
Even though my oldest is only 4, I still talk to her about money, buying and selling, and work. When we shop, I often mention prices and compare items out loud.
Take time and talk when you’re shopping with your children. Let them see you pay with cash. Let them see you budgeting regularly. This is a wonderful preparation for when they’re older and you can show them an actual budget and how to set one up.
Related: Easy steps to teaching teens how to make a budget
Allow them to have their own money
There are some easy ways to do this:
- Give them a weekly (or monthly) allowance
- Have them earn money for short, simple jobs (appropriate for their age and attention span)
Children (of any age) should not be paid for every job they do around the house. Most jobs at home should be done together (or divided up) because living as a part of a family means you share household responsibilities.
You could decide to have a few tasks always be paid jobs or only “extra” jobs (ones that are not regular or involve more work).
For young children especially, don’t expect or demand perfection. (This is something I struggle with as my kids are little and often wants to “help” but can be rather “messy.” For example, my girls put their clothes away in the drawer and I am learning to let go of the idea that everything will be in neat, tidy, organized rows inside.)
Some job ideas for 2 – 4-year-olds:
- Clean up a small bunch of Legos or blocks
- Put away a simple game
- Match socks from the laundry (unless you have a ton!)
- Put away all the stray shoes in their place (We always seem to have stray shoes around the house!)
- Water the houseplants (We only have a few so this is an easy and fun job.)
When you pay little children, do it immediately and enthusiastically after the job. Small children have a small attention span and the reward should be right away.
Related: Chores for Kids: Ideas for Every Age
Teach them about saving
When your children are young this is a good time to introduce the concept of saving with:
- Family savings jars
- Individual saving, spending, and giving jars.
For the family savings jars, you can keep a coin jar in a public area. Every time you find stray coins (or bills) put them in the coin jar and talk about how, as a family, you will save coins to buy a special treat (for example, ice cream). When the jar is full, have your children help you count out the coins and decide what treats to get.
Another way to introduce saving is to start your child with saving, spending, and giving jars. This is a popular method of introducing these concepts to children.
First, gather 3 containers and label them “Save”, “Spend”, and “Give”. Then, when your child has some money, talk to him or her about putting a little bit into each container and what each is for.
Children can use the money in the “Save” jar for buying a larger toy or item they really want. The “Spend” jar can be for immediate treats or snacks. The “Give” jar can be for tithing at church or another charity.
Related: More ideas on how to teach kids to save money
Take them shopping with their money
When your children have money (as a gift or from their “save” jar), take them shopping! Talk about how much money they have to spend and the prices of the items. Since little kids can get overwhelmed with too many choices, give them a limited selection of items to choose from.
Talk about your job
As a single mom, who works from home a lot, I often talk about my job with my girls. My 4-year-old asks questions and I tell her about what I do and that I make money doing it. I explain why it’s important (we need money for shopping for food, clothes, paying bills, etc.).
My 4-year-old has also visited her dad’s office, saw the desk where he works and met his co-workers. Even though she’s only 4, I make sure to talk about these things and encourage her to ask questions and be curious.
Remember, money habits are set by age 7 – she has 3 years to go!
Be a good example
Last, but not least, you need to be a good example for your children. This is the most important part of being a parent in all areas of life.
If you want your children to eat healthy foods, you need to eat healthy foods.
If you want your children to be responsible, you need to take responsibility for your own life.
If you want your children to manage money well and live debt-free, you have to do this yourself!
As you learn, grow and work toward your own personal money goals (living debt-free, buying a house, etc.), your children will grow up seeing, hearing, and learning good money management skills from you. Talk to them about it!
If you are struggling to get out of debt, see my post on getting out of debt for some tips to help you.
My dad was not very good at managing money. He spent carelessly and didn’t save for the future. As an adult, I look back and now wish someone had talked more with me about money, saving and living without debt when I was younger.
Even though I am living debt-free now, it would have been nice to be better prepared when entering adulthood and making major life choices (where to go to college, how to manage money and keep a budget, what to do about debt, etc.).
Teaching children about money while they are still young, will help set them up for success later on in life, especially if you continue to talk about money management and budgeting as they get older. Be a good example, use practical, everyday life scenarios to teach about money, and continuet having these conversations as they grow older. When your kids become adults, they’ll thank you! I’d love to hear your ideas for teaching children of all ages about money! What do you wish your parents would have done? What will you do differently with your own kids?
Related: Money Management Tips for Teens
Related: Financial Lessons for Teens
For further reading, check out this great book about teaching kids money basics:
Smart Money Smart Kids by Dave Ramsey & Rachel Cruze
