Teaching Your Kids About Money

Financial Advice


By: FCU Team

It’s never too early to teach your kids about money. Whether they’re 2 or 22, financial knowledge is vital for everyone to have.

If you’re a parent of a youngster, specifically someone in preschool or early on in elementary school, it can feel difficult to get them to understand some of the nuances of finance. At this age, a child’s mind is like a sponge, absorbing much of what’s thrown their way.

While they are a little young to understand broad financial concepts, this is the perfect age to begin developing practical money skills.

Here are some small things you can do to introduce money concepts into your child’s life.

Create a Rewards System

Positive reinforcement is a powerful thing. Children might not understand the difference between a dollar and a hundred dollars, but they do understand treats and rewards.

Money is an incentive, even in the grownup world. For most people, the reason they go to work each morning is because they are ultimately rewarded with a paycheck. While not exactly the same, there are similarities as adults are rewarded for their “good behavior.”

You can teach your children the value of money by associating it with good deeds and incentives. Any time your child does something positive, such as listening, cleaning up after themselves, eating vegetables, or brushing their teeth, you can reward them with a treat or a little bit of money.

Keep a piggy bank for them, and each time they do one of these good deeds, deposit some change or dollars into the bank. One that is transparent is recommended, as it allows your child to see the progress of their money growing over time.

Teach the Value of Money

Commerce is the basic trade of items in exchange for money. It’s what gives cash its value in the real world. If you give your children money for good deeds or allowance, and they’re too young to spend it themselves, having a system of commerce is a good idea to give your rewards some value. Your kids can trade in their earned money for new toys, games, and trips to fun places.

By doing this, your kids will begin to understand that money is a tool. It can be used to buy things, but it can also be saved and used later for something even better. If a trip to the community pool costs $2, but a new video game costs $10, and a trip to Disney World costs $100, your children will learn to prioritize what they want, and save their money accordingly.

They do not have to actually buy these items themselves (a trip to Disney is obviously much more than $100). Rather, they’re learning how different items have different values.  They will discover that certain things have a much greater cost than others, and the greater the cost, the higher the value.

As a parent, you can set the prices to what you think is appropriate.

Make It Fun

little boy with glasses looking at piggy bank with fun glassesKids love pretend games where they have their own restaurant, grocery store, or bank. Whether you use real money or Monopoly money, playing these games with your children can teach them how the exchange of money works. There are plenty of other fun activities that you can do with your child, such as taking them to the bank or cutting coupons with them. Many financial institutions and grocery stores will keep treats like lollipops and cookies for the little ones who walk in. 

Another fun activity is collecting coins, where your child can learn the differences between pennies, nickels, and dimes, as well as gaining knowledge about America’s states, territories and the District of Columbia with the United States Mint’s collection of America the Beautiful Quarters.

Read With Your Child

Whether you read to your child or they read on their own, books are an essential resource to any growing mind’s education.

There are a number of children’s books that revolve around the basics of finance. Classic characters like Max & Ruby deal with saving and overspending in the picture book Bunny Money by Rosemary Wells. In the book A Chair for My Mother by Vera B. Williams, the characters try to collect and save their coins to buy a family chair after losing their home in a fire. This book not only teaches lessons about saving, but also about the unexpected events that can impact your budget and your life.

Another classic story is Just Saving My Money from Mercer Meyer’s Little Critter series. In this book, Little Critter works to save enough money to buy a new skateboard. This story teaches children about the values of saving, working hard, and the rewarding feeling of buying things with your own hard-earned money.     

The best way to teach young children about finances is to introduce them to an easy, understandable system of rewards and commerce. By being rewarded for their good behavior and being able to trade those rewards (cash) for real world items likes games and toys that differ in value, they will begin to understand how to earn, save, and spend.