Introducing Financial Concepts Series: Ages 3-5

In this series, I’ll provide timely concepts for your child’s age groups. This blog will go over how to introduce financial concepts for ages 3-5. If your child is older and you feel some of these 3-5 age group topics haven’t been covered, know that it’s never too late to go over the basics. Feel free to backtrack from the beginning no matter how old your child is!

Introduce the concept of money:

• • Explain its core purpose, which is quite simply, a way to purchase our day-to-day services and goods. 
  • Teach that money isn’t just handed out, it’s earned. And whoever earns it can then choose to spend, save, or gift it. Children at this age are by in large the receiver of money via gifting. But at some point, they’ll also be earners. 
  • Teach them the names and values of different coins and bills. It’s ok if it doesn’t all stick, but even just understanding that bills are worth more than coins, and recognizing that they all have different values is very helpful. 

Make it fun, Use Hands-On Learning:

• • A way to do this is by acquiring a toy cash register with fake bills and coins. Also providing them with a piggy bank so they can start holding any real dollars and coins they receive.
  • Create a play store at home where children can pretend to buy and sell items using the register and play money.
  • Take it a step further and let them make choices about what to “buy” with a limited amount of dollars and coins. At this age, it’s less about teaching math and more about stressing the concept that not everything can or should be purchased. They have to work within their means.

Last… but most Important, Set a Good Example:

• • Children often learn by observing their parents. While you likely demonstrate good money habits, it’s extremely important to talk them out vs. holding it in your head. Let your child hear and see your decision-making at the stores, when filling online shopping carts, and paying for any services. It can be as simple as explaining that you’re checking out books at the library because it helps to save money. The library is free. Ordering the same book on Amazon is $X. And that’s $X less dollars available for when you head to the grocery store. I can’t tell you how critical this is.  Almost every client I’ve worked with dealing with serious debt/cashflow issues have referenced the fact that their parents lead by poor or no example.

Final Thoughts:

Don’t be discouraged if your child does not grasp the concept of money right away. Consistency is key. And you’ll find that certain learning opportunities naturally present themselves. I know for myself that I learn by doing. And if I make a mistake, I’ll never forget it. So when certain situations arise lean into those moments as they’re likely to make a more lasting and practical impression. 

What do I mean by “situations arise?” At this age, you may find that a child tears money, hopefully not a big denomination. This is a good time to explain that bills in rough condition can’t be tendered. I also find that my kids leave their money around or mix it with the play money despite having piggy banks and wallets. So when they have an opportunity to spend their money, being so disorganized makes it difficult for them to find it. That’s an instant learning lesson to be more deliberate and careful with their money.

Another time my eldest daughter generously gave my youngest some money. He then proceeded to give it to my middle child, much to my eldest’s dismay. That was a learning lesson that gifts should be given without strings attached, and to think more carefully about who and why she’s making a gift in the first place.

Lean into all these types of moments.