How to Talk to Kids Under 5 About Money

When you have young kids, you’re thinking mostly about diapers to buy and how to deal with tantrums. But as they get older, you have other questions, like “Am I really giving them what they need to succeed in life??”

After all, we’re not simply raising children. We’re raising adults that will grow into a world where money is the basis of many things. Maybe it’s because I’m a CPA, but I’ve always thought about my kids’ impressions of money and how we talk about it in our family. Without instilling either fear or love of money in them, I want to teach my kids how to use money in a way that helps them succeed in life.

Of course, money conversations are not easy — even as adults. That’s why I’m breaking down how my husband and I are teaching our children (all under the age of 5!) about the value of money. I’ll show you how we talk about what it is and how to handle it, all in an age-appropriate manner. 

What is money… really?

When you talk to your kids about money, you really want to keep to the basics — what it is, how we use it, how we make it. When it comes to talking about what money is, we keep it simple.

We talk about dollars, coins, and denominations. 

A penny is a cent, four quarters equals one dollar, etc. Then, we practice counting money, adding and subtracting it, and breaking down what things cost versus how much they gave. For example, if we have $5 and spend $1 to buy a drink, how much money will we have left over? 

We also take the weight of money away by explaining that it’s simply an item we trade for another item. Instead of teaching our kids to view it as something completely separate, we teach them to see it as simply another thing you use in life. For example, if you want a LEGO set, you have to trade money for it. You go to Target, pick out your set, and give them money. In return, Target gives you the LEGOs! 

This is also where we talk about having enough money to pay for something. This is the foundation of helping them to understand spending and saving. If Hunter [link to hunter’s update shownotes] wants a book that costs $16, he needs to have that amount in order to get the book. This way, he saves up for it! 

How do you get money?

Once your kids understand what money is (something we use to get other things), it’s important to talk to them about how to get it. In order to get money, you need to work for it. We tell our kids: “Daddy goes to the power plant to work and helps make electricity for all of our homes.” Mommy “works on her computer,” as Gage puts it, to make money for the family. 

Both of us are helping people by doing what we’re good at and that we know a lot about. Luckily, we love what we do. But everyone goes to work to earn money, even though not everyone enjoys what they do. We also teach our kids to appreciate the luck that comes when your job is something you enjoy, are good at, AND helps others. 

During this conversation, we also make sure to focus on the idea of helping others by using your strengths and things you’re good at. The fact that everyone is good at and likes different things is what makes our world go around! 

What do you use money for?

We talk with the kids about exactly how we use the money that we make. We give them explicit examples of what we pay for with money, including: 

1. the house we live in
2. the cars we drive
3. the food we eat
4. the clothes we wear
5. for them to go to school
6. saving for emergencies (we tread lightly with this one bc Hunter is nervous by nature)

Then, if we have money left over after paying for what we NEED, we can use it to pay for other things like:

1. fun activities such as the zoo, jumping place, etc
2. going on vacation and to Disney World
3. eating out at restaurants
4. buying books, toys, etc.

Of course, this ties back into the kids’ understanding that, in order to get what they want, they need to have the money for it. It’s an ongoing conversation, one that I hope really helps our kids have a healthy relationship with money — and how they earn it — as they grow.

The importance of the money talk

Talking with little ones about money is a super important , but it can be a very difficult thing to do! I also know that many of us grew up in families where talking about money was “taboo,” so this might feel awkward or even unnecessary. But as any parent knows, your kids are watching and listening! Now’s the time to think about how you talk about and engage with your money, and how you talk to them about it. 

I hope these tips will help make that conversation a little bit easier, so you can continue setting your kids up for success.