Teaching Kids About Money During Early Childhood – Ages 3 to 5

Why Teach Kids About Money?

Kids need to be taught about money.  Kids are surrounded by marketing aimed directly at them. At a young age, the impact of marketing towards them is likely insignificant in the grand scheme of your child’s life. Later in life, the decisions made as a result of similar marketing could have a larger impact on their lives by taking on poor deals with products such as credit cards and student loans.

Money Lessons With Kids Need To Begin Early

Money lessons need to begin at an early age. Beginning at a young age is the best way to form effective habits – pre-school through kindergarten is the perfect time for this.  Each kid is different and as you begin you’ll quickly be able to assess what your child can comprehend and enjoys taking part in. Don’t worry, it’ll be a few years before you need to teach your child about 401ks and life insurance. Begin by discussing with your child that you work to purchase things such as housing, food, toys, and supporting charities.

What’s Best? Allowance VS Work VS Chores

The decision on how to handle your child’s allowance, work, or chores is a personal one. The following is what we feel will set our children off on the correct financial foundation. We believe that an allowance can send the wrong message.

An allowance sets a president that the child receives a fixed sum of money on a weekly basis. It seems that this approach typically involves loosely defined chores. Chores may or may not be completed and the child typically receives their allowance either way. As kids grow they will find that their part time job only pays for time worked or their salaried job is based on performance.

We teach that a child receives compensation for defined jobs, chores, or work – call it want you want. This teaches that decisions have consequences. If the child works, he or she gets paid, otherwise there is no payment. Children should still be doing chores around the house. They shouldn’t be taught that the only chores they do are those that involve compensation. For example, one of our son’s jobs is to clean up the toys which he also does with us daily. Occasionally, when we ask him to do a job we will specifically ask him to clean up the toys. He’ll then receive payment for that instance.

Establish a list of chores that your child can perform. The dollar value for each chore is a personal family decision. The type of chore should be age appropriate. At this age, it is not important to obtain perfection from a task or for the child to even complete it 100% on their own. They’re young and may still require help – that’s quite alright. The following is a short list of possible chores for a child ages 3 to 5. Use your discretion – some of these chores may require adult supervision and help.

  • Empty the Dishwasher
  • Make their bed
  • Set the table
  • Clean up the toys
  • Water Plants
  • Feed Pets
  • Unpack the groceries

We keep a chart on the refrigerator with five different jobs and associated dollar values that our 3-1/2-year old can do. When he does one he receives immediate payment. The immediate payment is beneficial at this age because it provides immediate gratification. Praise your child as they are doing the job and when it’s completed. If payment is received days later the child may not be able to associate why they’re receiving the money.

A Traditional Piggy Bank and Visual Savings

Almost every child has some form of a traditional piggy bank. At a young age the problem with this is that the child has no sense of what they’re accumulating. Switch to something that is translucent. If your family has an individual job that your child is paid more than five dollars for, consider paying them in singles. You want them to observe the accumulation of money. Take time to recognize your child’s accumulation and praise them for their good work. At this early stage, we’re not going to teach the difference between spending, saving, and charity. We want to teach that work provides money and that money can purchase items.

At an interval your family feels appropriate, you should take your child to a toy store with their earnings. Let them pick out a toy of their choice. Use this opportunity to teach them the value of money. Show them toys that are in their price range. It’s not important to be a stickler at this age. If there’s a toy that is slightly out of range the lesson is not lost. It is ok if you contribute to cover the difference. Let your child hand the cashier the money. They’ve now experienced working, saving, and spending. This has also been a lesson in delayed gratification, in teaching them to wait for what they want.  All of this has been accomplished at a level comprehensible to them.

Demonstrate Good Financial Behaviors

Kids are always watching and listening. Set a good example. Getting and keeping your finances in order will allow you to be a good role model to your children. In today’s age of debit and credit cards, money lessons are even more important. Children must know that these cards are not magic and that they’re simply a conduit to our bank accounts. As your children grow and mature they’ll be able to handle new lessons such as differentiating between saving, investing, spending, and charity.


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