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Personal and Business Banking

First Lessons About Money

StreetWise Parents' Guide

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First Lessons About Money

It's time to start teaching your kids about dollars and cents.

First Lessons About Money

How soon is too soon to start teaching children about money? Most children begin to develop an awareness of money around age 2 or 3, according to child development specialists. That's not too soon, then, to begin to involve preschoolers in activities that will form a good foundation for future money management skills. The specific activities used should be tailored to the interests and abilities of the individual child.

In addition to considering the tips in this article, we suggest that you familiarize yourself with Show Me and Barnyard Cents, DCU's financial education sites for young members. Although these sites are designed for youth from elementary age through college, parents who review these sections regularly will find articles and games they can also use with their preschoolers.

Money Lessons for Ages 2 and 3

Identifying Money

  • Working with an adult, very young children can use coins to begin to count objects and to identify like objects. It's okay to talk about the differences in value and the uses of money with them, but don't expect them to understand this information yet. Try to think and talk about money in children's terms.

  • Children will make plenty of mistakes in sorting and in learning the names of pennies, nickels, dimes, and quarters. Never criticize or belittle. Guide, encourage and allow them to learn from mistakes.

  • If you have a change jar, letting small children help you separate the coins into a coin sorter or into rolls can be a fun game.

Saving Money

  • Piggy banks are a hit with even small children. Clear, nonbreakable banks let them see the money mount up. You might give them the pennies out of your pocket or purse each day or so to let them put in their bank. A family savings jar to which every family member contributes and which is then used for a family treat such a meal out at a favorite place helps preschoolers participate in family money management.

  • DCU offers savings accounts for young members from birth on (as long as they have a social security number). But very young children have trouble with abstract ideas such as placing their money in a place they can't see. Even if you start a savings account for a very young child, you may wish to wait to introduce it to them until they can understand and use it.

  • If a child accompanies you to DCU, explain in simple terms what you are doing when you deposit money – how you worked to earn it to pay for the things the family needs like clothes or their favorite foods, how the credit union keeps it safe for you until you need it, and so on.

Money Lessons for Ages 4 and 5

Identifying Money

  • Continue to help children identify coins and bills, working especially on comparisons and values. For example, the concept that pennies are bigger than dimes but do not have as much value (ability to buy something) is one idea that kindergartners begin to grasp. Work also on identifying the difference in bills – like a puzzle, find different objects on the bills that make them distinctive even though their color and size is the same.

  • When you get cash from an ATM or use a credit card to make a purchase, begin to explain to a child what you are doing, and the relationship of the money to your job, and the relationship of the credit card to borrowing money, like they might borrow a toy from a sibling or friend.

Saving Money

  • Piggy banks still work with this age. You can introduce the idea of paying interest. You might add a certain percentage to their savings each week and let them hold the coins and add them to their bank.

  • Many children by age five are ready for an allowance. Experts recommend that you make the amount and the time you give the allowance consistent. Discuss responsible uses for their allowance, including saving for things they want. Let them use their money as they wish, but within family guidelines.

  • Begin to make the connection between their piggy bank and a savings account at the credit union.

  • Preschoolers are very aware of and influenced by commercials. You might select a relatively inexpensive toy that they want, identify its cost at the store, talk about whether it delivers what the commercial promised, and if they decide the toy has value, use their money to purchase it if they have enough, or save for it if they don't.

Using Money To Buy Something

  • Playing store is a time-tested activity to teach children the value of money. Help children create the store based on real items and real money, even though the activity is "pretend".

  • Let them spend their piggy bank savings or allowance under your supervision. Talk about what kinds of things represent good value for money.

  • Let children help you select items from a grocery shopping list and help you pay for them at check out. Let them purchase their tickets to a family movie.