4 Money Concepts You Can Teach Your Kids Now

By Mindy Filadelfia —

My three-year-old has a pretty good understanding of currency and value.

Mind you, in Evyn's world, currency is comprised of toys and treats, but it's the basic understanding of value that she has mastered. We can now make it through a toy aisle without one (or both) of us crying and begging all the way back to the car while the peanut gallery shakes their collective head. It was during one of these lovely scenes at Target that she just got it. She had asked for some doll that looked like a cross between a zombie hooker and a transformer in a bikini, so in complete frustration I was honest with her. I said, "Evyn, Mommy only has five dollars to spend on treats. We can get this one doll today, or we can get ice cream after school every day this week—that’s five ice cream cones. Which sounds better?" By the grace of all that is good and holy, she stopped screaming and chose the week of ice cream. I kept my word that week, and the lesson stuck—everything has value, and that value depends on how badly you want that thing. I realized that I was in a perfect position to start teaching both of my children four important money basics that will eventually turn into positive financial habits.

1. Turn the abstract into the tangible by encouraging comparisons

Kids (especially young kids) have a difficult time with abstract concepts. Some researchers even argue that children cannot learn abstract concepts like comparative value until their emotional and language skills have been mastered. I'm not sure if I agree with that, because on Halloween, children of all ages across the nation come home with a bucket full of goodies, dump it out on the living room floor, and (after parents take their cut) begin the sorting and bartering process. One full-size Kit Kat is a fair trade for five miniature Snickers, or one Bazooka bubble gum for two mini Tootsie Rolls—kids quickly learn comparative value and everyone comes away happy with a bag of their favorites. Encourage this by playing games that require your kids to compare items, and try to get them to verbalize why one thing is better than another.

2. Play with fake money in a realistic way

In our house, we have "Elsa dollars" because, like every other little girl in America right now, Evyn is obsessed with the movie Frozen. I took a picture of her dressed up as Elsa and printed out a bunch of fake money for her to play with. She earns Elsa dollars by sharing with Quinn, her little sister, or by picking up her toys, etc. We play “grocery store” and "restaurant” and she requires me to pay in Elsa dollars that she gives me for sharing with her or for picking up my own stuff (I'm raising a bossy chick, I know). She'll even tell me I can't have the special cupcake she made out of Play-Doh and glitter because I don’t have enough money. The goal of this kind of play is to encourage decision-making, and apparently, there's also the side effect of giving my little princess the impression that I work for her . . . but that's an issue for another article. I want her to understand that money does run out, so she needs to make good choices about how she spends it before it's all gone. We have recently come to the agreement that she should be able to buy treats from our kitchen with Elsa money too. She has yet to agree to the terms, as she doesn't think a Popsicle should cost her one Elsa dollar after dinner, but five Elsa dollars before dinnertime.

3. Save some for later

I promise, it is not impossible to teach a toddler to choose to delay gratification. Being able to tolerate delayed gratification is an essential skill that is difficult even for some adults, so it may take some time and practice, but in the long run, you are setting your kids up for financial success. My little circus clowns and I practice this by saving random things for later. Whenever my girls get a treat, I always ask if they want to save some for later. Most of the time, they choose not to save anything and devour the cookies or candy I just handed them right away. But as I started saying “no” to treats more often, Evyn began to see that saving a little for later is the best way to get around Mommy's “no.” I knew it was working when at her friend's birthday party, my daughter asked for a plastic bag so she could save some of her birthday cake. When the host's mother asked her why, she said, “Because my mommy is going to say no treats before bed." I couldn't have been prouder of my little strategist! She was preparing for a time she would normally have to go without. I really had no choice but to let her eat the cake she saved before bed that night. Score: E-1, Mommy-0.

4. What about fees and interest?

Yes. You read that correctly. Evyn understands fees and interest because every time she asks her Daddy for a treat, he says “yes,” then takes a big bite of it and tells her it’s the "getting up out of my chair tax." So now, she'll ask for a treat and say, "Don’t get up, I can get it myself," and runs over to drag a dining room chair into the kitchen. In his own Dad-ish way, he has taught her the value of doing a little extra work to prevent unnecessary loss. This is similar to mowing your own lawn instead of hiring a landscaper for sixty dollars a month. A great lesson nonetheless, even if it is just because he wanted a bite of her Hello Kitty ice cream.

Evyn also has a piggy bank that is serving as the meager beginnings of her future emergency fund. Whenever I have extra change, or she finds a coin around the house, we put it into her piggy. Once in a while, I'll let her pull some change out of it to buy a treat from the ice cream truck when it comes around. One Saturday while dripping a strawberry shortcake Popsicle all over herself, she asked me how many ice cream cones she could buy with all the money in her piggy. Turns out she had enough to buy eleven. She was very impressed and decided to scour the house for more change. When she dejectedly reported that she hadn't found any, I told her that we would count out all the pennies in her piggy each week and add it up. Then, for every group of ten, I would give her another penny. She didn't quite understand until the next weekend when we counted up all the coins, and I owed her eighty cents. It was almost enough for another ice cream, and she didn't even have to go digging in the couch cushions!

One of the best parts about being a parent is being able to set your children up for success using the knowledge of what doesn’t work to teach what does work. So, as I write yet another check for a minimum payment on a credit card that I maxed out, it warms my heart to see my daughter slowly beginning to master skills I didn't even think about until I was well into college. I'm setting my kids up for financial health and success, and you can too with a little creativity and a lot of patience.