First Lessons About Money

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How soon is too soon to start teaching children about money? Most children begin to develop an awareness of money around age 2 or 3, according to child development specialists. That's not too soon, then, to begin to involve preschoolers in activities that will form a good foundation for future money management skills. The specific activities used should be tailored to the interests and abilities of the individual child.

In addition to considering the tips on this article, we suggest that you familiarize yourself with Thrive by Five™: Teaching Your Preschooler About Spending and Saving, from the Credit Union National Association, has activities you can use with your children and other resources.

Money Lessons for Ages 2 and 3

Identifying money

  • Working with an adult, very young children use coins to begin to count objects and to identify like objects. It's okay to talk about the differences in value and the uses of money with them, but don't expect them to understand this information yet. Try to think and talk about money in children's terms.
  • Children will make plenty of mistakes in sorting and in learning the names of pennies, nickels, dimes, and quarters. Never criticize or belittle, guide and encourage and allow them to learn from mistakes.
  • If you have a change jar, letting small children help you separate the coins into a coin sorter or into rolls can be a fun game.


Saving money

  • Piggy banks are a hit with even small children. Clear, nonbreakable banks let them see the money mount up. You might give them the pennies out of your pocket or purse each day or so to let them put in their bank. A family savings jar to which every family contributes and which is then used for a family treat such a meal out at a favorite place helps preschoolers participate in family money management.
  • Your credit union may offer savings accounts for young members who have a social security number from birth on. But very young children have trouble with abstract ideas such as placing their money in a place they can't see. Even if you start a savings account for a very young child, you may wish to wait to introduce it to them until they can understand and use it.
  • If a child accompanies you to the credit union or bank, explain in simple terms what you are doing when you deposit it—how you worked to earn it to pay for the things the family needs like clothes or their favorite foods, how the credit union keeps it safe for you until you need it and so on.


Using money to buy something

  • Even very young children can help parents use money to pay for something. Let them purchase one item at the store—perhaps their breakfast cereal, which studies indicate is usually the first thing children identify and want to choose at the supermarket.
  • Let them help you feed coins into a parking meter, coin-operated washers and dryers, pay phones, vending machines.
  • As they develop, preschoolers need to begin to make limited choices. For example, you might let them choose between three treats at the store—apples, juice, or raisins, for instance—and pay the cashier for it.

Money Lessons for Ages 4 and 5

Identifying money

  • Continue to help children identify coins and bills, working especially on comparisons and values. For examples, the concept that pennies are bigger than dimes but do not have as much value (ability to buy something) is one idea that kindergartners begin to grasp. Work also on identifying the difference in bills—like a puzzle, find different objects on the bills that make them distinctive even though their color and size is the same.
  • When you get cash from an ATM or use a credit card to make a purchase, begin to explain to a child what you are doing and the relationship of the money to your job and the relationship of the credit card to borrowing money, like they might borrow a toy from a sibling or friend.


Saving money

  • Piggy banks still work with this age. You can introduce the idea of paying interest. You might add a certain percentage to their savings each week and let them hold the coins and add them to their bank.
  • Many children by age five are ready for an allowance. Experts recommend that you make the amount and the time you give the allowance consistent. Discuss responsible uses for their allowance, including saving for things they want, but within family guidelines, let them use their money as they wish.
  • Begin to make the connection between their piggy bank and a savings account at the credit union.
  • Preschoolers are very aware of and influenced by commercials. You might select a relatively inexpensive toy that they want, identify its cost at the store, talk about whether it delivers what the commercial promised, and, if they decide the toy has value, use their money to purchase it if they have enough or save for it if they don't.


Using money to buy something

  • Playing store is a time-tested activity to teach children the value of money. Help children create the store based on real items and real money, even though the activity is "pretend."
  • Let them spend their piggy bank savings or allowance under your supervision. Talk about what kinds of things represent good value for money.
  • Let children help you select items from a grocery shopping list and help you pay for them at check out. Let them purchase their tickets to a family movie.

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