Talking about money and finances with young children can feel as inappropriate and as uncomfortable as asking acquaintances about their salaries, or how much they pay for their mortgages. 

On one hand we want to protect our children from adult matters and stress as long as possible, while on the other hand we wish that our children could grow up to be financially responsible and develop strong money management skills. Because, as grown-ups, we all know it is impossible to ignore the importance of money. 

So, how can parents help children get smart about money management and finance? The answer is simple, although the timing might surprise you.

1. No need to wait long until your child becomes “mature enough”

When is the appropriate time to start talking about money to your children? You might think you should wait until at least the preteen years or even later, for your child to understand money and financial concepts—but this is not true. 

Even children as young as 2 or 3 can understand that they need money to get something from a store. As long as your child understands the basic concept of exchanging money for goods, you can start to build on their understanding of money.

2. Teach the difference between buying what they want and buying what they need

It might not be easy to resist your child’s desire to walk out of the store with a toy he or she has fallen in love with at first sight, but it is important to teach kids to distinguish what they want versus what they need from an early age. 

You might face a few dreadful fits from your unhappy child, but he or she will quickly learn that you do not spend money on something you do not need.

Once you’ve pulled that bandage off, quick and painful though it may be, it will be much easier for you to take your child into stores and involve them in your shopping process to demonstrate proper spending habits.

3. Help them understand the importance of saving

Teaching your children how rewarding saving can be will raise them to become conscious money managers, who save for rainy days and build their financial stability.

The easiest way to teach your little one about saving is through hands-on experience. You could give him or her a small allowance to deposit in their own name, and let them watch the numbers grow. 

Help your child plan to buy something they need, but also want very much. Let them patiently watch the account balance grow as they look forward to purchasing that sought-after thing from their savings.

4. Let them observe healthy financial habits from you

The best way to teach children is by being their role model. Take your preschooler shopping and show how you plan the shopping, starting with the list, and how you decide which products are the best fit, based on price and quality. 

By frequently watching you budget and plan your expenses and handling your money consciously, your child will learn mindful money management.

5. Guide your child to develop entrepreneurship 

Having strong entrepreneurship can strengthen your child’s financial skills and sense of purpose.  

To have strong entrepreneurship, children need to develop strong problem-solving skills, planning and autonomy.

Help your schoolers accomplish little tasks from beginning to end by themselves, to build self-confidence and self-control as they figure out how to solve problems.

Let your little one make plenty of mistakes during the process of finishing each task and try to refrain from stepping in to solve problems for them. It might be hard to watch them repeating the same mistakes over and over again, but this is exactly the part of the process that will strengthen their entrepreneurial skills and autonomy.

6. Encourage children to learn about economy and finance habitually

Play: During playtime, you can teach children about buying and selling with toy money, to let them get used to the idea of how money works. Monopoly is a game you can start with your preschooler. Although it might be challenging at first, it is a great game to teach the basic concepts of money and financial transactions, decision-making, mathematical thinking, and executive functioning skills.

Visual resources: One thing that makes educating kids easier now than ever before is the abundance of content online covering virtually any subject. Take advantage of the rich variety of educational, visual content about money on Youtube, or free charts and other printable resources on various sites, to fill your child’s indoor time with material that is not only easy to understand but also entertaining at the same time. 

Books: 

1. The Four Money Bears by Mac Gardner CFP 

Follow Spender Bear, Saver Bear, Investor Bear, and Giver Bear and learn how they work together, as they learn to build a budget and teach each other to better manage their money. Simple, fun, and easy-to-understand financial tips that will lay the foundations for strong financial literacy and expose young children to healthy financial habits. 

2. Little Critter: Just Saving My Money by Mercer Mayer

Easy to read for little first-time readers, this book follows Little Critter, who wants a new skateboard—but there is a challenge. His Dad tells him that he needs to save his own money for the skateboard. How will Little Critter handle the challenge? Will he succeed in buying his new skateboard?

To summarize, there are so many resources to help children grasp the basic concepts behind how money functions. Expose your child to various materials about finance to encourage a clear and healthy understanding about money that will become a helpful cornerstone in their lives. 

Start talking about money early on and show children on a daily basis how you take care of financial decisions, to educate your preschooler about the powers and dangers of money, as well as how to be smart with it. 

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