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6 fun financial lessons for your preschooler

Allie Johnson

May 18, 2015

You have to teach your preschooler to read, pick up toys and share — personal finances lessons are probably not at the top of the list. However, teaching your child about simple money lessons early can pay off later.

“Any financial life skill you teach your little one makes it so much easier when they're teens or adults,” says Neale Godfrey, a creator of personal finance apps for kids and author of “Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children.”

Here are six financial basics preschoolers can begin to learn, along with fun, hands-on ways to teach money lessons:

Money basic No. 1: What is money? — Show your child that money has value and can be exchanged for things, says Danny Kofke, a retirement consultant, former teacher and author of “A Bright Financial Future: Teaching Kids About Money Pre-K Through College for Lifelong Success.”

  • Tray of coins — Get a silverware tray with multiple compartments, says Clint Greenleaf, founder and CEO of Pigs & Bricks, an interactive site to help kids learn about money. In separate compartments, put 100 pennies, 20 nickels, 10 dimes and a $1 coin. Explain that each compartment contains the same amount of money, he says. At first, kids will think it's best to have 100 pennies and that a nickel is worth more than a dime because it's bigger, he says. But the tray activity will help show that bigger is not always better and will lay the foundation for teaching your child to count money, he says.
  • A trip to the store — Fill your wallet with coins and take your child shopping. Let your child buy a small item like a toy or some stickers using coins. “Your child can see that when you hand over a certain amount, you get an item in return,” Kofke says.

Money basic No. 2: Earning — “Teach your little one that the only way to get money is to earn it,” Godfrey says. Consider taking your child on a short visit to your workplace so he can see how you earn money, Greenleaf suggests.

  • Odd job cards — With your child, make cards that have pictures of different age-appropriate chores — such as putting napkins on the table, throwing a plastic bottle in the recycle bin or dusting. Godfrey adds that these should be “extra chores” beyond the basics your child must do to contribute to the household. Pay preschool children for each chore right away to show the connection between work and money, Greenleaf says.

Money basic No. 3: Budgeting — Show young children how to budget their money, dividing it up for different uses, Greenleaf says.

  • The three piggy banks — Create a budgeting visual by giving your child three piggy banks — one for spending, one for saving and one for giving, Greenleaf recommends. It's best if the piggy banks (or jars) are clear so the kids can see the money, Godfrey says. Make an activity of decorating the three piggy banks so that your child can differentiate between them. Help your child divide her allowance amongst the three categories.

Money basic No. 4: Saving — Tell your child that saving means choosing to get something later rather than now, and that saving can help you get bigger things, says Vince Shorb, CEO of the National Financial Educators Council.

  • Save for a goal. Preschool kids can learn to save for something they want, Godfrey says. It's best to start with something small, such as stickers or an inexpensive toy that your child could save for in just a couple of weeks, she says. Help your little one visualize the goal by having them draw a picture of it and creating a colorful savings chart to track their progress, ChoosetoSave.org recommends.
  • A trip to the bank. Take your child on a field trip to the bank, and explain what a bank is, Godfrey recommends. “Tell them it's a place that keeps your money safe,” she says. Open a long-term savings account for your child, Greenleaf recommends. Make sure to get paper statements so you can show your little one how the interest builds up, Greenleaf says.

Money basic No. 5: Giving — Kids can and should learn that money allows you to help others who have less.

  • Give to charity day — Help your child choose a cause that's dear to her heart so she doesn't feel like giving is a “tax,” and take her to make a donation in person, Greenleaf says. For example, he took his daughter to the local animal shelter to hand over a fistful of coins, and she learned the money would buy food and toys for the dogs, he says.

Money basic No. 6: Borrowing — Credit is too complicated for preschool kids to learn, but teaching them about borrowing items lays the foundation for lessons about credit and credit cards later on, Shorb says.

  • The borrow-a-toy — Teach preschoolers to borrow an item, take care of it and return it in the same condition in which they got it, Shorb says. “That's the root of credit,” he says. Have your child and a trusted older sibling or babysitter borrow something from each other, Shorb says. Ask them how they want the other one to treat their possessions. Reward them with a little prize for taking care of the borrowed item, he says.

Parents will have to repeat money lessons and build on earlier teachings as their kids grow.

“The key is consistency, starting young and helping your kids build on their base of knowledge,” Shorb says.