Help Them Recognize Coins and Bills
After they have learned to count to ten, the next step is to teach them how to recognize what the different coins and paper bills mean. One method is to set up a table with a bunch of pennies and help them count out how many pennies it would take to equal a nickel, dime, quarter, and dollar. When you think they have gotten the concept, test them by giving them a choice of which they would rather have: 6 pennies or 1 nickel.
Use Play Money
Purchase play money, or fake money, for them to use during their playtime. This will help them learn about the concept of money in general. If you don’t want to purchase play money specifically for them, use Monopoly money or give them the change from your pocket.
Set Up a Pretend Store
Kids love to play “pretend” and “make believe”. Use this opportunity to play store with them. You can set up certain items from your house for them to “purchase” with the play money. Then, swap roles and have them act as the shop keeper and you can purchase items from them. This will teach the concept that money can be exchanged for goods.
Have Them Participate In Shopping
At this age, they probably won’t be able to count out the money when you go shopping, but they will be able to do certain things. For starters, have them hand the money to the clerk when the total order has been rung up. While it might seem like a little thing to you, it will get them involved and will help reinforce the concept that you are paying for something (such as groceries). Also, if you typically pay for items with a debit card, begin using cash when they are watching to help them understand the concept.
Give Them An Allowance
While they might seem a little young for an allowance, it is never too early for them to start to learn the concept of having their own money. Depending on their age, you should not make the allowance more than $1 - $3 per week. Then, help them decide whether they want to save their money (like in a piggy bank) or spend it on something at the store (like a candy bar or small toy).
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This post is part of the series: How To Teach Your Kids Good Money Habits
Many of the bad money habits that adults have are a result of how they dealt with money as a child. If you can teach your children how to manage money responsibly at a young age, then you will set them up for success later in life.