Teaching Your Preschooler Financial Literacy
One major problem that adults face is debt. This debt is often traced back to poor money management habits. That is why it is important that we teach our children financial literacy at an early age. By educating them early and teaching them good habits, you lower the risks of them making poor financial decisions. Here are a few ways that you can teach your preschooler financial literacy.
Teach Them What Money Is
One of the first lessons when it comes to financial literacy is teaching your child what money is. You can either buy (or print) pretend money (be sure to use bills as well as coins) and teach your child about the different denominations. You can also show them your debit/credit card and your checkbook if you have one. Let them hold them. Ask them to sort the bills and coins by size and denomination (depending on their age and skill level). This will help them learn to differentiate between all of them. Also help them to count money, beginning with pennies (or the smallest denomination in your country).
Teach Them That Things Cost Money
Next, you will need to talk to your child about the value of money. Money is not simply bits of paper and metal. It has real-world value and can be used to buy things that we want and/or need. They also need to know that most things that we want or need have a price tag attached. As you are out and about, use every opportunity you can to point out the prices of things that you are buying or doing. You can even let them help you count out money for purchases
Teach Them That You Have to Earn Money
The next logical step would be to teach them that money is something to be earned. “Money doesn’t go on trees”. Many children fail to understand that money does not just appear in our wallets or bank accounts. Explain to your child that money is something that you have to work to earn. You can start off by explaining to them how you and/or your partner go to your job every day, do a certain set of tasks, and then are given money for your hard work. You could then offer them the opportunity to earn money by giving them allowance for completing chores around the house. This will not only help them with financial literacy, but can instill in them an early work ethic.
Teach Them How to Budget Money
After they learn how to earn money, it is time to learn how to spend it. “Don’t spend it all in one place”. Often, when kids get a lump sum of money, they get excited and want to spend it all in one place. (I bet we all know adults who are the same way, right?) Teach them how to prioritize their spending so that they are using their money wisely. This habit is a great one to develop so that they don’t develop the habit of frivolous spending when they are adults.
Teach Them How to Save Money
Finally, it is important to teach your child how to save money. “A penny saved is a penny earned”. Teaching your child how to set aside money for later is a great way to help them learn to delay gratification and to set financial goals. One way to do this is to find an item that they really want to buy and work out how much money they would need to save each week to buy it in a certain amount of time. Not only will this teach them about saving and goal-setting, they will likely appreciate the item more having had to save up for it.