5 Age-Appropriate Financial Concepts to Help Teach Kids About Money

girl with money in her hand sitting at a table calculating her earnings

Learning how to manage one’s finances is an important life skill. And just like any other skill, starting early will help kids master the language of money faster. Mastery over one’s finances leads to confidence around money. But when and how do you start teaching your kids about money? Children as young as 3 years old already have a concept of value and exchange, which is the foundation of economics. Likewise, research shows that children’s financial habits are formed at the age of 7. With this in mind, it is best to start early when teaching kids about money. Here are five age-appropriate financial concepts to help teach your kids about money.

1. The Concept of Identifying Money

Identifying money is the foundation of teaching money management for kids. The concept of currency and denomination can be taught to pre-school kids aged 3-5 years old. Start with coins—their color, size, and value, and the proper name for each coin (penny, nickel, dime, or quarter, short for “quarter dollar”). Explain that money is based on the dollar unit and expound on the breakdown—such as four quarters add up to one dollar.

2. The Concept of Value, Cost and Exchange

Explaining the concept of value, cost and exchange to kids aged 3-5 is the next step in teaching money management for kids. Make the lesson fun by using money board games or imaginary play, like shopping or going to a restaurant. Similarly, you can utilize trips to the grocery store by instructing your kids to take note of the prices and observe how each item adds to the total cost as you are at the check-out counter.

3. The Concept of How Money is Earned

As soon as kids are able to grasp basic monetary ideas, the next step is educating them on how money is earned. Emphasize money as a reward for doing work. Use examples that are relevant to your financial setting such as mom or dad going to the office to work and earn money. Children around the ages of 5-7 are more receptive to this concept. Reinforce the concept of earning money through age-appropriate chores around the house, or perhaps little tasks to earn coins for their piggy bank.

4. The Concept of Saving Money

little boy sitting with his piggy bank learning about finances

Learning how to save for a rainy day is an essential life and financial skill and should be included as a topic in money management for kids. A child who knows how to save will grow up having a deeper appreciation for the benefits of waiting. Around the ages of 5-7, kids can appreciate the concept of saving.  Giving kids a piggy bank or savings jar is a good way to start. At this age, try to find a way for your kids to earn $5 to $7 per week.  Point out to your kid how his or her savings is growing day by day and how it accumulates over time.

5. The Concept of Budgeting

Explain the concept of budgeting by mentioning how resources are finite. Emphasize that because of the limited resources we have, we need to allot resources to more important things—like food and clothing. You can inject here a lesson or two on the difference between ‘needs’ and ‘wants.’ School-aged kids as young as 7-years-old actually begin noticing other kids’ stuff. This time can be a good opportunity to expound on the concepts of budgeting, prioritizing ‘needs’ versus ‘wants’, and spending within one’s capacity.

It is worth mentioning that teaching kids about money is a gradual and consistent process. The concepts mentioned above can overlap and occur alongside other topics. Parents can increase the complexity of the lessons as children grow older. For instance, parents can introduce the concept of opening a bank account once a child has filled up his or her piggy bank or savings jar. Additionally, as a child approaches his or her teen years, parents can start introducing more complex topics such as taxes, credit scores, credit cards, and long-term loans. But that’s a concept for another article.

About the Author

Imee Rabang is a blogger/writer and bilingual poet from Manila, Philippines. She is an advocate of Philippine culture and supports causes that promote language and national identity. She juggles her time between work, parenthood, and community outreach programs. She also dabbles in photography and graphic arts in her free time.
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