Updated on 08.17.07

Five Money Lessons For Preschoolers – And Applying Them To My Own Child

Trent Hamm

Liz Pulliam Weston over at MSN Money wrote a brilliant article entitled 5 Money Lessons For Preschoolers. In it, she elucidated five simple lessons about money that you can introduce to your preschool children:

Money can be spent, saved, and shared
Saving should be a habit
Once money is spent, it’s gone
People have to make choices with money
Don’t trust ads

Articles like this are incredibly interesting to me as a parent of a child approaching two (and a newborn set to arrive in less than a month). I’ve been trying to already do many of the lessons above with my own child already, even though he won’t be two until November, and continually reinforcing these lessons throughout his early life. Here are the things I’m already doing to apply these lessons to my child.

Money can be spent, saved, and shared I often buy small things in cash in front of my son and try to make the exchange clear to him. I actually say, “See this money? I’m going to give it to this person and in return that person will give us this food (or whatever good we’re buying).” Usually, the person at the counter plays along very visually with this, which helps. Recently, I gave him some money in the store (three quarters) and let him select a piece of fruit – he took a banana. He wanted to eat it immediately, but I told him that it wasn’t his yet and we had to go pay for it. Then he gave the quarters to the person at the counter, got some change back, then was given the banana.

One of his favorite games is actually putting coins in a piggy bank, so I quite often give him a bit of pocket change. He’ll go put it in his piggy bank. We’re also using the change (and many other things) to teach rudimentary counting – he’s basically got counting to three down pat.

Saving should be a habit Part of the reason that I regularly give him money to put in his bank is so that this seems like a normal and regular thing. I want saving money to be a regular part of his life, not something done at special occasions, so I encourage regularly putting money into the bank.

He hasn’t quite made the connection yet to the money going into the bank and the money at the store, but I think he’s getting close. It should be interesting when he figures that out.

Once money is spent, it’s gone This is a hard one to teach at this early age. I was somewhat shooting for this when I gave him the quarters to buy a banana, but he actually seemed quite happy that he received more coins in return (pennies!) than he used for the banana. This one will have to come about with many regular buying experiences, I think.

People have to make choices with money Again, the process of choosing and buying the banana was a good example of this. As he grows, the choices will become more and more complicated, but for now he at least understood that he had options in the store, which is a great first step.

Don’t trust ads Our home is nearly television free. The only program he has watched in the last three months (DVDs included) is a couple episodes of Sesame Street. His daycare is also television free, as well. My thought is that I want him to be a bit older before seeing commercials so that it’s easier for me to teach him how to distinguish between them and the programming. Thankfully, as little as we watch television, he won’t have to face this too much until he’s substantially older.

Teaching my toddler about money – actually, teaching him about anything – is a lot of fun. It’s amazing to watch him learn and begin to apply what he’s learned.

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  1. redhelper says:

    I don’t know if it is so much about not exposing him to commercials – your level of brand awareness and behaviors in relationship to brands is what will shape him. Also, the money exchange thing might be a little abstract (it still is to me, and I am almost 40). Barter games could be away to prove the point — money is just a “representation” of wealth. Things in the end don’t cost money, they cost resources.

    Blessings to you and your family!

  2. Robin says:

    This is sort of a random comment, but I was reading an earlier post where you talked about baby formula, and this one talking about the impending baby made me think of it. Is your wife planning on breastfeeding this baby? Along with the obvious financial benefits, the health benefits are enormous. If this is something you’d rather not discuss on your financial blog, I understand. :)

  3. Brip Blap says:

    Trent, you wrote the article I wish I had written. Liz’s article got right to the point and so did yours. There’s no way you can start too early with these lessons. Children grasp so many complex subjects so quickly that it’s hard for their parents to understand. Finance shouldn’t be neglected even though it’s a “grownup” subject.

  4. Kate says:

    Wow! Great post — I never thought that my young daughter could begin to conceptualize this stuff. I wish I had been taught — I would not have gotten myself so seriously in debt — and i am going to begin teaching her right away.

  5. plonkee says:

    It’ll take him a while to realise that nickels and dimes are worth more than pennies. Until then, you can probably only start getting the spending money thing by using pennies or having the exact amount of the purchase.

  6. martha in mobile says:

    My daughter started getting an allowance when she was four (divided into spending/saving/charity). This eliminated virtually all whining and begging in stores — when she wanted something extraneous I would tell her that I did not care to spend my money on it, but that she could spend HER money. I would tell her how much she had in her spending money and she would decide. When we got home, she and I would count out the money she owed me. Over time, she has learned that if she spends money on one item, she cannot spend it on another. Since I worked in advertising, I have been able to teach her to dissect the ads — the expectations they create, the associations they suggest…but always that the sellers do not care about HER, they care about her MONEY.

    Also — the best way to teach an older child to make change? Let them keep the change if they get it right. They catch on like lightning!

  7. Sarah says:

    Be ready to discuss artificial value placed on advertised products when Jr goes to school. Particularly in a shift from a preschool program with values like yours to a more general population.

    I wasn’t allowed to watch children’s commercial programs, so at lunch when other kids talked about the latest cartoon character (and had lunchboxes, clothing, stickers, and other promotional items for which the tv program is the ad) I felt left out of conversations and found it hard to connect with peers. My parents didn’t have a good strategy for this, other than ‘those programs are trash’, ‘don’t you like your clothes?’, ‘I’m not having you waste your life in front of the television’ – all of which I agree with now, and really did then.

    But at six I didn’t have a way to tell my parents that I was having trouble making friends because I couldn’t find anything in common. It took me a long time to figure out a way around these superficial connection opportunities (“Which My Little Pony is your favorite?”) to something more lasting, and that was a needless social hardship at school.

  8. Roberta says:

    Great article, we allowed too much tv for my two sons. My oldest has one daughter and strictly limits tv for her. I guess he learned in spite of us. My comments go to your comment about limiting ads: “My thought is that I want him to be a bit older before seeing commercials so that it’s easier for me to teach him how to distinguish between them and the programming.”

    My concern is for children watching tv seeing “real” shows and people dying; then the next day seeing the same people alive and in another show. Children do not know these moves are staged and not “real.”

    My youngest had a difficult time understanding the difference between documentaries and news – real stuff vs drama.

    Be prepared, because your son won’t ask while he is watching the show, it will be when you are in the car driving to school or the grocery store. Then you have to figure out which show he is talking about, Crocidile Dundee or the Animal Channel show you just watched! Good luck

  9. Lucas Jackson says:

    Beware of Sesame Street. It is all advertising. Walk into any store and notice the overabundance of Sesame character licenced goods. You’ll have a child begging for an Elmo shirt and Cookie Monster toy before long. And the educational value of SS really is not what it is made out to be.

    On the other hand, parental teaching is still the best way to educate and instill values and I’m sure that your child is way ahead in that department.

    You may already have one, but if not getting a passbook savings account in your son’s name is also a great idea. Then take the piggybank to the real bank so the child learns the value of putting money in the bank anf the beginnings of the concept of interest.

  10. james says:

    I understand your concern about keeping your house television and commercial free but there are numerous educational shows that are on DVD nowadays.
    I started my son on the brainy baby and baby einstein dvds when he was 3 months old. He’s progressed to toddler aged shows like Go Diego Go and the backyardigans.
    Unlike most children his age at daycare, he’s way ahead of the bunch. His attention span, vocabulary, and learning is twice that of most of the kids in his class. And most of the toddlers in his class are older than him.
    I’m not saying the dvds are the reason why but we also sit and read to him.

    if your concerned about commercials, then rent the dvd’s if you don’t want to buy them.
    My wife and I have seen benefits of educational child programming. Don’t be so quick to say no. Children’s shows have changed in the last 20 years.

  11. ralthor says:

    I hate change so if I have it I dump it somwhere in the house. I told my son that any change he finds is his. When he gets it he puts it in his carseat’s cup holder so when we are out he can buy a gumball or candy or something like that.

    He just started kindegarten, but one of my proudess moments was when he went to the store and wanted to buy a toy. We counted out the money for it and he had enough, so he carried it around the store until he found another toy that he wanted to get for one of his classmates who was having a birthday. Usually I buy the presents for birthday parties and such, but he wanted to get it so we counted his money and he had enough if he didn’t buy himself a toy. He decided he would rather buy his friend a present than get himself a toy. I couldn’t believe how selfless of an act he was willing to make at his age.

  12. Susan says:

    With preschoolers size does matter! It will be a while before your little one realizes that a dime is worth more than a nickel. Quarters will always rule because they are the largest, but until he is able to conceptualize the math – he will cherish a nickel over a dime. No matter what – you are doing well and it is a joy to watch our children learn.

  13. m360 says:

    There may be more benefit to keeping youngsters away from TV than we realize. There is an article on MSN Health that suggests symptoms of ADHD could be caused by TV. In fact, the American Academy of Pediatrics says no TV for kids under 2. Here’s the link:


    The sad thing is we’ve become acustomed to using the TV as a babysiter. They just don’t know the effects it has on children, especially since it may rewire the young child’s brain. On the other hand, they found TV to be beneficial for ages 3-5.

    Advertising is often targeted at children. They don’t justmake comercials. There are deliberate psychological tactics that are often directed at children. Even though children don’t make the money, advertisers know that if a child wants something enough, s/he will whine, complain, maybe even cause an embarassing scene in a store. Kids will often bread down their parents. Also, in a society where we work so much we feel guilty. We think spending on the kids will make up for neglecting them thru work and other activities.

    The comment on sesame street was profound. I remember watching sesame street as a kid, one of the few programs I watched until I was a little older. There were no elmo dolls or other such toys back then. Mabe an item here and there but not much. Now, it does seem like a marketing gimic.

    I also liked the idea of giving children an allowence. Let them choose what they want to spend their money on. I know this is really effective as an adult. You don’t get the instant gratification. It teaches you to save up for something. Say an item costs $10 and your allowence is $5 a week, well you have to wait 2 weeks. Maybe you won’t want it by then.

    Too many parents fail to teach these strategies to their children. They set them up for failure as an adult. I think they should concentrate a bit more on this is school, even in the lower grades. I had a teacher who did this one year. We earned ‘monopolly’ money for good behavior and could spend it on various items. Maybe even getting out of certain assignments, I cant remember exactly. It’s too bad that didn’t continue the next year.

  14. m360 says:

    An old friend’s 12 year old son would go with me to the store to help me carry out heavy items. I would look over the various options for a particular item. He would ask me why, and I would explain how, say a 2 liter bottle of soda cost less than a 1 liter. When we went to pay for the groceries, I would give him the money or the card and let him pay. With the card he would have to swipe it, put in the pin, wait for the receipt. The process confused him at first but he got the hang of it. Just think. Nobody taught him these basic skills.

  15. Sharon says:

    I’m not so sre I’d be willing to tell a 12-yr-old my PIN. 12 is awfully close to those teenage years when kids can get really impulsive regardless of how trustworthy they seem now.
    And he may or may not remember it, but it may come back to him if he sees it again. I learned someone’s number I thought it was interesting because he had a pattern in it. Completely forgot it until I saw it as a name of a rock album. Even now, if I wanted, I could figure out what that number was, google is a great thing.

  16. Boy, I have a cousin who wants to spend Rs. 2500 on crackers (it’s Diwali time here), which is roughly $60 but hell lot of money here in India. My granny could buy a month’s supply of grocery with that money. My uncle doesn’t mind spending so much. I think she needs to know the mechanics of money. How do I teach myself to teach her the effective use of money?

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