Teaching a 5-year-old about finances might sound absurd. They’re still mastering basic routines — so what should they possibly learn about money?
If you want to raise afuture Savinly reader, though… It’s nevertoo earlyto begin introducing financial smarts to children.
That’s why we’ve outlined what a 5-year-old should grasp about money, plus some playful, kid-friendly methods to teach those ideas.
The first four lessons come from Money As You Grow, a useful toolkit developed by the President’s Advisory Council on Financial Capability, and the final tip is a special suggestion for Savinly readers.
Here are five lessons your 5-year-old — and budding money whiz — should learn…
1. You Need Money to Buy Things
What is money? What is it used for?
Concepts about money that seem obvious to you may be totally puzzling to your child.
Start by letting your child handle money directly.Teach them coin and bill names, then use those pieces to practice simple counting.
Whenever you buy a low-cost item — like socks, a small book or a cookie — mention the price. Then count out that money together.
Playing “store” (one of my favorites!) is another excellent way to cement this idea.
2. You Earn Money by Working
One friend recently discovered her children thought ATMs just made money and dispensed it to anyone. (Wouldn’t that be convenient?)
It’s important not only to clarify what money is but also to explain where it comes from. You don’t want them believing in magical money trees or machines.
Tell your child the only real way to get money is by working.
Point out different jobs they could do when they’re older, and describe what you do at your own job. Explain that you work so you can buy food, clothing and other things that help your family thrive.
Also remind your child they have a job: to do well in school.You don’t need to link grades to future earnings yet; just explain that everyone has responsibilities, and for kids, that responsibility is to pay attention and try their best in class.
3. There’s a Difference Between Things You Want and Things You Need
Teaching children to separate wants from needs can be tricky — it’s a lesson many grown-ups still struggle with!
A playful way to show the contrast is to have your child draw two circles: one labeled wants and the other needs. They can sketch items in each circle, and you can discuss why each belongs where it does.
Another perfect moment? Trips to thegrocery store.
Use those occasionally stressful outings to chat about money and healthy choices. Hold up items and ask your child, “Need? Or want?”
Turning the cookies-versus-carrots debate into a game can make shopping both more tolerable and instructive.
4. You May Have to Wait Before Buying Something You Want
Building on the previous idea, this is about delayed gratification. (A useful refresher for adults, too!)
An allowance — even a tiny one — or a small enterprise like a lemonade stand can be powerful tools for teaching financial lessons to children.
With your child, choose an item from the “want” circle of their drawing, and plan how they’ll save for it. Keep it modest and attainable, such as a set of markers or a cuddly toy.
Once you’ve decided how they’ll save, give them atransparent jarso they can watch their money accumulate weekly.Helping kids form a saving habit early makes it less of a battle later on.
5. It’s Fun to Save Money
This tip is tailored especially for Savinly readers; since you love cutting costs, it’s great if your children enjoy it too.
An easy approach? Clip couponstogether!
Flip through circulars and have your child find items you normally buy. Let them clip, hold and hand coupons to the cashier to involve them in the whole process.
If you want to make it extra motivating, give them the money you save with their coupons — a surefire way to spark their enthusiasm for bargains!
Even if you don’t teach your child every one of these ideas, at least startconversations about money. Avoiding the topic entirely is the worst move.
You might not be perfect with money (news flash: None of us are), but by giving your child basic financial understanding, you’ll prepare them for a secure future.
Here’s to your future Savinly readers!
Your Turn: Have you started teaching your kids about money?
Alex Martin, a senior writer for Savinly, enjoys budget-friendly adventures. Visit her blog at alexmartinblog.com, or say hi on Twitter @alex_martin.
