It’s important to start teaching your children about money, and the earlier you start the better. But what money lessons can you give a 5 year old?
It can be daunting to try to talk money and saving to a kid who is still mastering coloring in the lines and eating something other than macaroni and cheese.
Here are 6 money lessons for younger kids, simple ideas that even young children can understand.
Play with coins
Kids are tactile learners. Playing with coins can be a good activity that develops money recognition and counting skills, plus makes that great clanking sound..
Just make sure your child isn’t going to put small change in their mouth before you start.
My daughter loved putting coins in a piggy bank. When she was younger, we worked on counting the number of coins going in. Then we talked about what their names are (penny, nickel, dime, quarter) and what each coin is worth. We looked at the different pictures on the quarters, and she has a small collection of cool looking coins.
What was she learning? At first, it was just a way of practicing counting. Then, she learned the value of the different coins, and learned to actually count money. Two dimes and a nickel is worth the same as a quarter or 25 pennies. She’s also learning that her money adds up as she adds to it. Each time we added to the bank, she had more money.
We still have piggy banks of sorts, only now there are two jars for saving and giving, and one money box for spending. But she never would have been ready for an allowance if we hadn’t started with the coins and the piggy bank.
Imaginative play is extremely important to younger kids. My daughter loves to set up a “store” with her toys and get her dad and me to make purchases.
We like to make her work for a sale, describing the benefits of each item and getting her to draw out what we need and make a match. The more complicated we make it, the better she seems to like it. That’s because she knows we are committed to playing in her pretend world with her. We do the same thing when she wants to play restaurant.
If you can immerse yourself into this type of imaginative role play, you are helping your child develop communication skills and salesmanship.
Money makes you choose
One of the earliest lessons we taught was that money makes you choose. If we do one thing, we cannot do another. We can buy Mint Oreos, or we can buy Lemon Oreos. We can’t buy both, because we have a limited amount of money to spend on Oreos. If we buy Mint Oreos, and you don’t like Mint Oreos, we are not going to go back and buy Lemon Oreos any time soon because we’ve already spent the Oreo money.
Another way we made the point about choices was a decision we made during our annual beach vacation. Our daughter was allowed to spend $20, which she used to buy two mermaid dolls and a pink hat. She didn’t have enough for the oversized mermaid beach towel she wanted. She couldn’t buy the dragon kite and still get the dolls and the hat. Little Bit had limited funds, and had to make choices about what to buy. They were 5 year old choices, but they were hers.
Neither of these decisions was life altering. The point of these exercises is that I am getting my child to make money decisions and live with the consequences of those decisions. It’s important to let even 5 year olds make mistakes. Like us, sometimes they learn more from mistakes than from good choices.
This is more expensive than that
Last year, my daughter wanted a blue long sleeve shirt. Since she had outgrown several of last year’s fall clothes, I agreed that we could buy her one.
We went to Old Navy, and she picked out a bright blue microfiber workout jacket that cost $20. I didn’t think it was worth the cost: it zipped up the front, so it would be uncomfortable without a shirt under it. But it didn’t add much in the way of warmth, or even add water resistance. She also has 3 or 4 light weight jackets already. She was determined to get it because she really loved the color.
After hunting around for half an hour, I found a sweatshirt the exact same shade of blue for $9. I explained she could get 2 of the blue sweatshirts for the same price as the blue jacket. She was happy to make the switch, particularly after she touched the super-soft sweatshirt. And I thought it fit the holes in her wardrobe better than another jacket.
Kids want what they want. One of the first lessons you can start teaching them about saving money is to substitute a less expensive option that satisfies the same need. If they ask why you are buying the generic brand instead of what they see on TV, explain why you make the choices you do. It won’t be long before they’re helping you spot the bargains.
There are ways to get more money
My daughter picks up cans. Ever since her dad told her not to throw away aluminum cans because you can sell them for money, my daughter has kept her eyes peeled. I admit that picking up someone else’s trash is kind of gross, but I’m proud that she’s already started a side hustle with her dad. Because her dad and I are not afraid to tell her we can’t afford every Monster High doll she wants, she thinks about ways to get more money to spend. Her ideas aren’t always practical, but the entrepreneurial impulse is there. We just have to train and nurture that impulse, and the rest will come.
Maybe you can let your kid spend some money from selling their toys at a yard sale or consignment shop. Maybe you can let them do a few extra age-appropriate jobs around the house to get the money to spend for a movie they want to see or a toy they have their heart set on. The point is to let their wants drive them to put in some extra effort to get what they want.
You can help someone with money
There’s always someone less fortunate than you. There’s always someone who needs help. We talk with our daughter about the fact that not everyone has enough to eat or a nice place to live. Now she won’t let me walk past the food pantry donation display at the grocery store without a discussion about whether we’re going to donate. We talk about how lucky we are to be able to buy all the things we need, even if we can’t buy everything we want.
Last year, when we started our allowance system, we told her she had to put aside 50 cents a week for donation. We saved up until Christmas, and then let her choose where the money would go. We talked about church, the food pantry and the ASPCA. She wanted to give the money to her school’s backpack buddies program.
You don’t have to wait until your child is old enough for an allowance though. If your family usually makes donations, you can give your child a say in some of the causes you give to so they participate. You can take them with you to drop off donations. Even letting them drop a little change in a Salvation Army Bucket helps teach them to give to others.
A Preschooler is Not Too Young to Learn Money Skills
Parents may think their 2 or 3 year old is too young to start learning money skills. Little kids can learn a lot though, if you will put in the time and effort. A shopping trip can become a lesson in basic economics if you pick the right conversation topic.
If you want to teach your child money skills, then don’t make money a taboo topic. Start your conversations early, and you’ll set your kid on the road to financial success.
Do you have a favorite money lesson for younger kids? What money topics do you think are appropriate for preschool/kindergarten? Please share in the comments.
Image courtesy of photostock at FreeDigitalPhotos.net
Originally published 6/8/15, updated 8/3/16.