5 money lessons for preschoolers

By Liz Pulliam Weston

Before we had our daughter, I thought financial education should begin somewhere in the grade-school years.

Clearly, I underestimated kids.

Our daughter, who's almost 5, has taught us that children are ready to learn about money as soon as they're old enough not to swallow it. And increasingly the evidence suggests that we shouldn't wait to begin teaching them.

Attempts to teach financial literacy to high-schoolers aren't working. The courses, which are sometimes touted as a cure for rampant money mismanagement in our society, don't seem to improve high-schoolers' money savvy at all, according to research by leading financial literacy expert Lewis Mandell, professor at SUNY Buffalo School of Management.

Even middle-schoolers are often resistant to messages that contradict the pervasive messages to consume that they get from advertising and their peers.

Catching kids younger, and instilling habits like saving, may be the key to money lessons that actually take.

"It may be more indoctrination than education," Mandell speculated. "They need to know things like, 'saving is good.'"

Advertisers certainly have no compunctions about targeting preschoolers, noted Sam X Renick, a former financial services executive whose company, It's a Habit, publishes money books and music for kids. Parents need to push back against those messages, he said, and teach kids the basics "before they're too cool" to listen.

Renick's Web site and the "Thrive by Five" resources offered by the Credit Union National Association are great places for parents to pick up ideas and resources for teaching preschoolers about money.

I've combined some of those lessons with my own experience to come up with these five money lessons your child should understand by kindergarten.

Money can be spent, saved and shared

The first concept -- that money can be used to buy things -- is the easiest of the bunch. Our daughter had it down by age 3 1/2, which is when we not coincidentally started her allowance (more on that later). It took a bit longer for her to grasp the concept of putting money aside to be spent later. And sharing … well, we're still working on that. It's mandatory in our household, but like peas, it's not much appreciated.

• Video: What's a proper allowance?

Piggybanks, by the way, can help with all these concepts. When she was 2 and delighted in stacking and naming coins, we gave her piggybanks with removable plugs so she could put money in and take it back out again. Now that she's a little older we use a Moonjar, which has sections for spending, saving and sharing, although I also like the four-section Money Savvy Pig as well as the Amazing Money Jar, which counts coins as they're deposited.

Saving should be a habit

Developmental experts agree that by the time most children are 4 or 5, you can teach them about saving by helping them put aside money for a goal, such as a toy they want to buy. (A savings chart can help.) But you can actually start instilling the habit of saving even earlier by simply making it mandatory: A portion of any money they get is put aside for "later."

Continued: "Out of every dollar, save a dime"

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