Early Financial Education: Teaching Kids Money Skills from Ages 5-8
Starting to teach children about money at a young age can set the foundation for a lifetime of financial literacy and smart money management. As a mom to a 5-year-old boy named Liam, I’ve found that even simple activities can help children understand and appreciate the value of money. Inspired by the book Raising Financially Fit Kids by Joline Godfrey, which outlines specific activities, tasks, concepts, and actions you can introduce to children from as early as age 5, I’ve implemented several strategies to teach Liam basic financial skills.
One of my favorite quotes from the book is
“Allowance is not an entitlement or a salary. It is a tool for teaching children how to manage money.”
For children aged 5 to 8, Godfrey emphasizes the importance of learning ten basic money skills, such as how to save, track money, talk about money, spend wisely, and use money to do good in the world.
Here is what I am adapting and implementing with my son Liam.
Start Early: Basic Money Concepts
Even young children can grasp basic money concepts. It’s crucial to start early with simple, tangible methods that make the idea of money relatable. One effective way is using a piggy bank for collecting spare change. This allows children to see the physical accumulation of money, reinforcing the idea that saving can lead to something bigger.
What I am doing:
- Tooth Fairy Money: My son Liam, now 5 and a half, has lost three teeth this year. Each time, the Tooth Fairy leaves a little money, which he adds to his piggy bank.
- Cash Register Play: Liam loves playing store with his various toy cash registers. This game helps him understand the concept of transactions and the exchange of money for goods.
- Kids Wallets: Liam has several kids’ wallets that come with fake dollars, coins, plastic cards, and IDs. He takes them everywhere, which helps him get used to handling money and understanding its value.
Establishing Habits: Saving and Investing
Introduce saving habits early. When your child receives money, whether from allowances or gifts, encourage them to save a portion of it. This can be done through their piggy bank or a small savings account.
What I am doing:
3 Savings Jars: We use three jars labeled Save, Spend, and Give. This method helps Liam understand the different purposes money can have and the importance of saving a portion of his money for future needs. Liam has a smaller set of plastic Jars. This looks like it could hold a lot more.
Discussing Values: Family Views on Money
Talking about your family’s values regarding money is crucial. Explain how your family decides to spend, save, and donate. This helps children understand the purpose behind financial decisions.
What I am doing:
We still need to establish this more formally with Liam. Yuri and I intuitively know our values, but we haven’t discussed them directly with him. We often talk about saving money for vacations and trips, emphasizing that we save to explore the world, meet new people, make friends, and learn new things. This helps Liam appreciate the value of saving for experiences.
Using Games: Fun with Money
Make learning about money fun through games. Playing store or board games that involve money can teach children about spending and saving in a playful context.
What I am doing:
- Kids Monopoly Game: Liam loves playing the kids’ version of Monopoly, which teaches him about money management in a fun way.
- Playing Store: Using his cash register and other store-related toys, we play Target store at home.
- Lemonade Stand: We’ve set up a lemonade stand in our neighborhood, giving Liam a hands-on experience with earning and handling money. As we made a few dollars, I am looking to invest in something that has more visibility, like this stand.
Involving Them: Family Meetings
Include your kids in simple family meetings about budgeting and spending. This gives them a sense of responsibility and inclusion in financial decisions.
What I am doing:
We’re just starting with this. We talk about simple things like grocery shopping and discuss prices for items, helping Liam understand numbers and value. This practice will become more frequent as he gets older.
Setting Goals: Saving for Special Occasions
Help your child set savings goals for birthdays and holidays. Use a chart or an app to track their progress. This teaches them the value of delayed gratification.
What I am doing:
We use the phrase “Put it on your wish list” a lot and have started a list on my phone for Liam. This helps him understand that we don’t buy things on a whim but save for bigger events like birthdays or holidays. He keeps asking me to review with him what is on the list from time to time.
Allowance: Learning Through Chores
Introduce an allowance system tied to chores. This teaches children the concept of earning money. Discuss how they can use their allowance, emphasizing the difference between spending and saving.
What I am doing:
Liam is starting kindergarten next month, and we’ve decided this is the right time to introduce an allowance. We’re starting with $5 per week, allowing him to decide how to use it. He has three jars for saving, spending, and giving. We’ve been discussing the purpose of each category, using his Tooth Fairy money as a starting point.
Teaching children about money from a young age is an invaluable investment in their future. By incorporating simple activities and discussions, we can help them develop a strong foundation in financial literacy. As Joline Godfrey points out in Raising Financially Fit Kids, these early lessons can shape their financial habits and attitudes for life. Remember, the goal is not just to teach them how to manage money but to instill in them the confidence and knowledge to make smart financial decisions.
As I test out these strategies and tools, I’ll be sharing my own experiences as things unfold. With the right guidance and tools, like the strategies from Godfrey’s book, we can ensure our children grow up to be financially savvy adults!
