This post is part of the Money Matters For All Ages Project. See the end of the post for a list of where it has been and where it will go!

I have a preschooler (he’s 3) and a all-too-soon-to-be preschooler (she’s 1) so I think a great deal about how I can teach them from the start to be financially intelligent and to make smart choices about money. Even though it may seem early to start helping a three year old understand money concepts, they’re more aware of everything already than you might think. For us and our family, we have three main areas of understanding we’re working to help our preschooler grasp:

The concept of what money is, as far as values of coins and bills.

My son can count, so I’ve started explaining different coins to him, and how 5 pennies equal one nickel, four quarters equal a dollar, and other ideas like that. I’m working on him understanding that not all money is equal, and sometimes one of something is more valuable than 5 of something else. I really like the way Rocket Finance has been using coins with his preschoolers as well.

Money can be exchanged for things we want.

My son is old enough now that he’s started to want things he sees. He sees a toy in a brochure and he wants it. He sees an ad on TV and he wants it. We talk about what money is and that we can use money to buy these things. But i don’t just give him endless amounts of money. I do however let him make some choices with a finite amount of money, such as when we were at the zoo and he got to choose between french fries or ice cream with his $2. Lynnae at Being Frugal uses a behavior chart to help her son earn money that he can spend or save up for bigger things. I’m also starting the concept of a piggy bank with him, and teaching him about saving up for bigger items versus spending on small items.

Money is also a way to earn time.

My spouse goes to work at an 8-5 job every weekday, and my son is old enough to grasp the concept that Daddy is at work. So we talk about work and why Daddy goes there – to make money for our family so we can do things, but also to make money so he can spend Saturdays and Sundays at home with us. The concept that making money now can give us free time later is my first step in getting my children to understand that saving for later is a good thing. Eventually I will add explaining about saving for college to this.

Basically, I want my children to understand at a young age that money is something we need to take care of and use wisely, and that it isn’t the best idea to spend everything as soon as we get it. I also talk to my son about giving money away to those who need it more than us, and I will add more of that in the future (that is a concept he just doesn’t grasp quite yet). What would you (or do you) teach preschoolers about money? Leave a comment with your ideas!

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