How to Teach Small Children about Money

| July 7, 2013

English: Teaching and Learning

Good financial habits can take a lifetime to learn. Many of us struggle to conquer impulse spending and to train ourselves to save more and to make better investments. The earlier we can start learning these good habits, the easier these choices will be to make as we get older.

It is important to start teaching even small children about money so that they can build a strong base for good financial health later in their lives. Here are a few tips for how you can teach even small children about money:

Give Them a Piggy Bank

Small children are going to get money in smaller increments, such as coins from the tooth fairy or the couple of dollars they get for birthdays and other gifts. You can start teaching them about managing money by giving them a piggy bank. Make deposits into the bank, and talk about what it means when they want to make withdrawals. Have conversations about expenditures and how much money is still in the piggy bank. These conversations can lead to a basic understanding of money management that can grow as they get older.

Engage in Pretend Play

Younger children learn a lot through pretend play. You can start introducing basic concepts through activities such as pretend shopping and pretend banking. Give them play money and conduct pretend transactions to teach them concepts like budgeting, taxation, and even interest. Of course, you will need to adapt these games for their age level and understanding. Even simple games can start teaching them basic concepts.

Set Short- and Long-Term Goals

The ability to save for goals is an important skill to learn. You can start teaching young children this by setting short- and long-term goals with them. Short-term goals can include things like buying candy or a small toy. Long-term goals might be a larger toy or a present for a friend or family member. Let them set the goals, and keep them small (even the long-term goals). If the goals are too lofty – like an iPad or a Play Station – it will take too long to meet them and the goals will seem too abstract.

Use Your Own Activities as Teaching Moments

You are your children’s best teacher, just by doing what you do every day. Take advantage of the opportunities in your daily life to talk about money. This can include going grocery shopping, using your credit card to pay for gas, or getting money out of the ATM. Again, talk about what you’re doing in terms that are appropriate for their age and understanding.

Talk Early and Often

The earlier you talk about money and the more you talk about it, the more your children will learn. Don’t just talk about concepts like savings or interest. Be sure to also talk about the values you associate with financial choices. For example, you can talk about the value of working hard to earn things, or the value of minimizing debt to achieve great freedom. It’s also important to talk about the power of advertising and the place that material possessions have in your life. The more of these talks that you have, the better understanding your children will have.

It’s never too early to start talking to your kids about money. The earlier you start, the better educated they will be and the better prepared they will be to make good choices for themselves and their families. Use these tips to help you get the conversation started.

How do you teach your kids about money? Share your tips in the comments!


Chloe Trogden is a seasoned financial aid writer who covers specific opportunities such as educational grants. Her leisure activities include camping, swimming and playing her guitar.


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Category: Budget, Personal Finance, Personal Growth