Most people believe that there is no need to teach kids about money as they have no immediate uses for it but now more than ever, many families are feeling the stress of a strained economy. Every penny counts, and it is important that the whole family has an understanding of the value of money. While children under five won’t be able to comprehend more advanced money concepts, there are ways to start small and introduce financial literacy for kids at a young age.
Financial literacy is a set of skills that allows people to make smart decisions about their money. Being financially literate means you have an understanding of making, saving, spending (including donating), and investing money. For little ones, starting with the basics of money management might mean helping them learn how to earn money and make small decisions with how to manage it.
How can you help your child become financially literate?
- Engage in dramatic play: Set up a pretend farmer’s market or grocery store and have children practice purchasing different items and playing different roles.
- Assign values to items and test it through play: Price a variety of things throughout your house and ask children to pay for each one in different ways. You could use old coins if you have them or smaller denominations of money. You could also use pretend money.
- Teach children about “needs” vs “wants”: Have your child create a list of things they need and a list of things they want. Then, use practical examples to discuss the difference between the two concepts. Make lists of those very basic things they must have to survive (food, water, shelter, and clothing) versus those things they want to have like toys or sweets.
- Have them read age appropriate books about money.
- Have them help you out around the house and reward them when they do so they can understand the value of hard work.
- When they receive monetary gifts, help them learn to save by giving them piggy banks or pretend banks where they can keep their money themselves.
Conversations about money might feel uncomfortable at first, but breaking the ice with your children early on will help ensure financially literate adults, who feel empowered to ask questions and make smart decisions when it comes to managing their money.