As a parent of a 4-year-old and a personal finance blogger, people often ask me what kinds of lessons I try to teach my kids about money and whether 4 is just too early to make any kind of meaningful impact on a child’s financial future.
I wholeheartedly disagree. The mantras, habits, and emotions kids form around money at a young age will stick with them for a long time—I know that mine did (and still do). They need to be the right habits and not just those they pick up on TV or at school. Mom and Dad have to put in some face time and get the money message right, as soon as possible in a child’s life.
So what kinds of things do I recommend? Here are just a few of the ideas I’ve personally tried with my 4-year-old to start teaching him about money:
- My son understands that Mom and Dad work because they get enjoyment out of what they do, but also because it generates money for the family. He knows that our careers are not the only things in our lives, but they are important.
- He also knows that Mom and Dad budget using envelopes out of every paycheck, and that money has to be available in an envelope for us to spend it. The practical application is that when he wants a toy at the store, he knows why we can or cannot get it, at least financially speaking.
- Kids have a hard time understanding the concept of large numbers, such as big purchases or mortgage payments. We often relate the concept of money to the concept of time which is easier to grasp—for example, our son would have to find dollar bills at a rate of one per minute for an entire day to buy a plane ticket to Europe. Or, we might equate the purchase to the number of hours Mom and Dad have to be away at work to earn an equivalent amount.
- My son is put in a decision-making position as often as possible. For example, he was given $10 over Christmas to buy gifts for 2 cousins and a younger brother. He had to figure out how much things cost, and how he could divide his money so that he had enough for all the purchases.
- Given a piggy bank or another safe place, I’ve noticed that most kids will naturally save money for something they value. It might not be college, but it will be important to them, like a trip to Disney or a new bike. Harnessing this drive to save before buying is extremely satisfying to them, and to you.
- Finally, kids learn by watching and emulating. The most important money lessons can be those taught silently: simple frugality rituals like bulk shopping or turning off lights, charts showing the family’s financial goals on the fridge, or intentionally spending on experiences and family-focused events—all of these model good financial behavior for your children.
No matter which message you choose, teaching your kids timeless, solid principles of wealth building is a good idea. Getting them to understand that money rewards you with choices and opportunities in the future is the best financial gift you can share.