The other day my 3-year old son said to me, “Mom, you need to go to work so you can get lots of money to get me a new toy,” after I told him that we didn't have the money to get a new toy every time we go to the store. It's wonderful that my son realizes that his mom has to work to earn money, but I realized it was time to explain and show him the concept of saving.
Even though my son is only 3 (he still talks like he is an adult and it freaks me out sometimes), it's still up to us as parents to teach them smart financial habits at an early age.
If you have read this blog, you know how important it is to me to teach my son about money and finance. I was blessed with an amazing mom who raised me the best she could. She is literally the most important women in my life. I went to a great college and studied finance and economics for 4 years and graduated at the top of my class. Through all of it, the number one thing that lacked was personal finance education.
It's my opinion that personal finance is severally lacking in the educational system. It's crazy to me that I studied finance in college and after 4 years I still did not know how to budget my money. I never learned about how to properly handle credit cards, the consequences of interest rates, or the importance of saving (that's what credit cards are for right?).
I want it to be different for my son. I want to give him the opportunity to not make the same money mistakes I did so he has a fighting chance in this crazy financial world.
Today, I want to share with you some practical ways I am teaching my 3-year-old son about money and I am doing it by only using our spare change. Even at a very young age your child can still grasp the concept of saving and spending. Here's how I am teaching my son on how to be a mindful spender, a saver, a smart investor, and a giver.
Money Lesson #1: Identifying Coins
Even at a young age, my son can still tell the difference between a penny, nickel, dime and quarter. Giving him spare change for allowance made it easier for him to learn the names of coins, the colors and the different sizes. Every week when I give him his allowance, we sit down together and talk about all the different coins he receives. We use the Saving Worksheet offered in this post to match the coin to the image and we discuss each one's name and value.
It wasn't long before he knew that the quarter was the biggest coin and was worth the most money. When he gets quarters for his allowance he has a complete freak out moment. He also knows that the brown coin is worth the least amount of money and even keeps them separated from his savings jar. He tells me, “Mom, I am going to save those for later.”
Note: If you are dealing with a toddler like I am, please always provide close supervision. There have been instances of toddlers swallowing coins, so if you are giving your child spare change, always make sure you are present when they are handling their allowance.
- Related: The Day My Son Leaves Home
Money Lesson #2: Money Doesn't Grow on Trees
When your child sees you take bills out of your purse to purchase something at the store or watch them magically appear out of an ATM machine, they don't realize that money is limited.
My son asked me, “Mom, why do you have to go to work?” and it's the perfect time for me to explain to him that mommy has to go to work to earn money. Not only does he learn that money is earned, he also learns about responsibility.
The next time you go to a bank or ATM, let them know that a bank is a place that keeps your money safe. When you pull money out of your wallet to pay for something explain how much money you have and how much you are willing to spend.
The biggest money lesson I am now teaching my son is that going into a store doesn't always mean you'll buy something. I make sure that my son understands that we are going to the store for X, and we are not going to buy a new toy because that's not why we are going. It really is OK to let your child know that you don't have money to buy something.
Simple conversations about everyday situations are key to your child's understanding of important money lessons.
Money Lesson #3: Allowance
Some people might think I am crazy that I give my 3-year-old allowance. To me, the best way I can teach my son about the value of a dollar is to give him some money. The amount doesn't have to be huge. In fact, the allowance that my son earns is from our spare change. He gets $2 a week if he completes the following tasks:
- Keeping his room clean
- Listening the first time when he asked to do something
- Putting his dirty laundry in the hamper
- Saying please and thank you
These things might sound small, but they make a huge difference. You will be amazed what a 3-year-old will do for $2. Especially for $2 worth of quarters. When they have their own money, even if it's small, they can start to understand more important concepts. You can't teach your child about certain important money lessons if they don't have the opportunity to earn it.
For Example: When I tell my son we are going to the store and he asks if he can buy a toy, I ask him if he wants to spend his allowance. He realizes quickly that there is a relationship between getting a new toy and his saved coins. He can either save his coins or he can buy a new toy.
- Related: Saving For Your Child's Future
Money Lesson #4: You May Have to Wait to Buy Something You Want
The concept of saving is hard to learn at any age. Instant gratification is one of the hardest obstacles to overcome when it comes to saving so it's important to discuss it early. I am teaching my son that if he really wants something, he has to wait and save to buy it.
Since my son's allowance is very small and is made up of coins, he has to learn how to save it for a couple of months before he can buy a bigger toy. One way I am teaching him about saving is by having him draw pictures of his saving goals. This gives him an opportunity to share with me what he really wants and allows me to make sure I set him up for success. We hang it in the playroom where he can see it and this really keeps him motivated.
My son tells me all the time that saving is cool. As a parent, that's a really awesome thing to hear from your child. I let my son bring his change jar to the store after he has saved up enough to buy his saving goal. I will never forget the look on his face when he has the opportunity to pay for his new toy all by himself. He gets to experience how good it feels to work toward a goal and be rewarded in the end (plus it's really amazing as a parent to watch).
I offer to help him if his saving goal is a little more expensive. $2/week makes it a little hard for him to have big savings goals so I want to make sure he is still able to understand the concept of saving without getting too frustrated.
For example, I will tell him, “If you are good at grandma's house today, I will match this weeks allowance.” The amount of allowance you give your child is a personal choice, but if you are starting out at a very young age like I am, a small allowance can still help a child save for their goals.
FREE Saving Worksheet
I created a worksheet that I use almost every week. It helps me teach my son about money identification and saving. He absolutely loves this worksheet and I would love to share it with you all.
Counting My Coins
This section of the worksheet helps my son learn about how to identify each coin. He matches his coins to the different pictures on the worksheet and we count them together. Since he is only 3, I still have to help, but he has already learned so much. If your child is older, they can even use this section to add up their money.
For example, how many dimes equal $.20? How many quarters do you need to make $1.00? My son is still working on counting so we just count the number of coins he has for each one.
What I Am Saving For
My son LOVES to draw and color so I thought it would be fun to incorporate that into his saving goals. He uses this section to draw pictures of things he wants to save for. We hang it up in the playroom so he can be reminded of why he is saving his allowance. Sometimes I have to help him draw the picture but it's still a fun activity for us to do together. It gives him a chance to get excited about saving and I love that.
Color In Your Savings
We count my son's allowance every week and then we color in the caterpillar with how much he has earned for the week. He only gets $2.00/week so there are some weeks where he doesn't get to color the whole caterpillar. I was surprised by the effect this had on him. When he doesn't get to color in the whole caterpillar he knows he has to do better with chores next week. This is a good visual for your child to understand how much money they have.
DOWNLOAD THE FREE SAVING WORKSHEET HERE
Yes, he has green marker on his face 🙂
How are you teaching your child about money?