5 money lessons for preschoolers

As Renick's signature cartoon character, Sammy Rabbit, puts it: "Out of every dollar, save a dime." Having a specific goal isn't necessary; it's the habit of saving automatically that's important.

Once money is spent, it's gone

Kids naturally think of money as an ever-renewing resource. It's always sprouting out of their parents' wallets, isn't it? The idea that money is a finite resource starts with learning that a dollar spent is a dollar gone for good.

And the best way to teach that is to let kids spend money. Give them a buck at the dollar store, let them pick out something, let them pay for it. The first few times they may be surprised that they can't use the same dollar to buy something else, or that you won't cough up another buck if they change their minds after they've bought. Stick to your guns, though, and the message gets across.

People have to make money choices

Since this is a lesson many adults have a tough time learning, we shouldn't expect preschoolers to have a perfect grasp of it. But it's an extension of the money-is-finite concept that's essential to learn.

We began teaching this by giving our daughter a weekly allowance and allowing her to select how she spends it, within limits. Once the money was gone she had to wait until the next week to get more. If she decided to blow it the first day on little rubber snakes -- and she often did -- that cool keychain she wanted the next day had to be passed up. If you're giving your child a weekly allowance, consider cutting back to biweekly and then monthly payments as she gets older to give her more real-world experience in managing her money over time.

We contine to talk to our daughter about how we choose to spend money: on fun vacations, for example, rather than on fancy cars.

Don't trust ads

This is another lesson that may take years to really sink in, but you want to at least plant the seed of skepticism in your little one. The first task will be simply distinguishing commercials from shows; a 2-year-old probably won't be able to tell them apart, but a 4-year-old probably can. (Ours began shrieking "Commercial!" with equal parts horror and contempt when they come on.)

• Video: What's a proper allowance?

We've told her that commercials are designed to try to sell her stuff she doesn't really need and that probably isn't as neat as it's depicted. But mostly, we try to limit how many commercials she sees (thank heavens for DVDs and TiVo).

Teaching tips

As you're teaching, keep the following in mind:

• Keep it fun. Games, songs, coloring books and smiling piggybanks are great tools for teaching about money. So are discussions with your budding financial genius, but your tone should be light and conversational, not doom and gloom.

• Seize the teachable moments. Daily life offers all kinds of opportunities to talk about money. At the grocery store, you can talk about how you shop from a list to make sure you get the things you need and save money by not buying things you don't. At the bank, you can talk about how you put money into your account so you can get it out later to spend.

• Keep it simple. The older kids get, the more questions they'll ask about money -- and some of them will be stumpers. Try to keep your answers simple, and look for signs that the child's attention is wandering . . . you'll know lesson time is up.

Liz Pulliam Weston's latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated Sept. 17, 2008

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