Parenting a threenager is difficult, and the last thing you probably have energy to think about is teaching your preschooler about money. As parents, we all want to teach our children about money and how to grow, spend, and use money wisely. Here are a few tips on teaching your preschooler about money, that are easy to implement as a parent.
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After we completed our financial checklist as new parents in Canada, we have been discussing the family values that we want to impart on our young one and how we plan to enact this. Here are some money lessons for children that I think is important, and ways to implement them.
Table of Contents
MONEY LESSON 1: DELAYED GRATIFICATION
The first money lessons is delayed gratification. Delayed gratification is one of the main predictors of success (more so than a person’s IQ will predict success) and I’m sure you’ve heard of the Stanford marshmallow experiment, where children were given one reward or two rewards if they were able to wait 15 minutes while the experimenter left the room.
The study showed that those children who were able to delay their reward for a bigger reward had better outcomes later in life.
I find that my preschooler is more receptive to hearing lessons from stories in books rather than from me. It seems like many things I say are tuned out by my threenager, unless I am offering a food or snack.
The Berenstain Bears book Dollars and Sense is a great book because it teaches delayed gratification and money management. The Berenstain Bears books nowadays even come with stickers and even some pretend personal cheques
that your preschooler can write out.
What I liked especially about the book is that it is very reasonably priced and has some great wisdom in it, like how to manage your money.
The other Berestain Bears books called The Berenstain Bears Get The Gimmies is also a good book that teaches about delayed gratification.
MONEY LESSON 2: EXPERIENCES VS THINGS
Secondly, experience versus things is important to teach. This will probably be very difficult to teach (my friend who has children already, said “haha good luck!” when I told her our plan to teach about time and experiences versus material goods).
For some reason, our preschooler isn’t really that into toys. He has lots of hand-me-down toys from his cousins. Toys don’t really seem to motivate or enthral him, and we can’t use the idea of buying a new toy as a bribe.
Instead of offering
a bribe a consequence of good behaviour, we focus on experiences and offer those. For example, if he does this and that, we can go to to the park this week or to the beach (something that the preschooler enjoys doing), or go swimming, rather than offering him a toy.
According to Fast Company, science says experiences provide more happiness than material goods and we want them to value that as well.
Perhaps they become more interested in things and gadgets and toys later on but right now, it’s not evident from our tired parenting observations.
MONEY LESSON 3: COMPOUND INTEREST
Similar to delayed gratification, compound interest would be an important aspect of money to teach children, and understanding the importance of starting early.
I wish I knew more about compound interest and investing when I started working at age 15, I would have gotten much more of a head start! I would have been even more well equipped to fight back against the Motherhood Penalty. We plan to teach the child this during school-age years when they have the concept of math and growth somewhat down.
Physician on Fire has an interesting concept on how to teach your children about compound interest. This would again be for when our preschooler is older, maybe 4 or 5 even. It involves you being the Bank of Mom and Dad and inputting data into an Excel spreadsheet.
Instead of a 0.05% annual children’s savings account rate from the bank, for example, you could do a 1% monthly interest rate from the Bank of Mom and Dad. They will be able to see the growth much quicker and see that compounding in action in real time.
The 1% rate will be paid on the 1st of every month, and money contributed to it can include gift money, or birthday money, or money earned for extraordinary chores around the home. They’ll be able to see quickly how a savings account interest works and will be motivated to save money fast.
MONEY LESSON 4: EMPATHY
The next money lessons is empathy. Empathy and giving are important to teach children because they need to learn and appreciate money and the lack of it.
They should be able to empathize with others are less fortunate. Either this can be through donating their toys or contributing some of their allowance to the less fortunate.
As a child, we got to donate new toys and useful stationery through a shoebox with Operation Christmas Child. You can even pack a shoebox online by filling it up like a shopping cart and selecting items.
Even better yet, volunteering as a family to help and provide time and helping hands would be even greater (for example building a home or infrastructure in a developing country) as it would simultaneously satisfy my wanderlust- this is of course once the current pandemic is over and when they are older.
MONEY LESSON 5: GOAL SETTING AND MONEY
Finally, goal setting is important to teach your preschooler so that they understand you can use the money to achieve outcomes and things that they may want. I have personal finance goals that I set every year, for example.
That money or things they want don’t just magically appear (well, during Christmas time they might courtesy of Santa but other times of the year it won’t work lol). Although money doesn’t buy happiness, it can get you more options and give you more freedom.
Perhaps one way to achieve multiple lessons on money is by getting them to save their allowance money with the three jar method (one jar for saving and investing, one for fun money or spending immediately, and one jar for giving would be an easy way for them to learn about Goal Setting, Delayed Gratification, Compound Interest, and Empathy.
Another (more easier way) that does involve screen time, is watching Warren Buffett’s Secret Millionaire Club. It’s free on Youtube and there are tons of videos. The earlier videos are short, and around 5 minutes. Short enough for a short preschooler’s attention span and short enough to absolve the parenting guilt you may or may not have for screen time.
Each show has a routine, three entrepreneurial children call a meeting with Warren Buffett (which is interesting since Warren Buffett is known to hate meetings) to talk about a money issue someone is having.
They analyze the business and look for issues within the business, and at the end of the show, Warren Buffett shares his money management tips and tips for goal setting in life.
He always closes the show with “So remember kids, the best investment you can make is an investment in yourself”.
I think I enjoy the show more than my preschooler and I especially enjoy hearing Warren Buffett’s voice on his money lessons!
Teaching PReschooler About Money Tips Recap
Teaching your preschooler about money can be difficult, but hopefully these five money lessons aren’t too difficult to implement in your routine. They are absorbing information and knowledge like a sponge during these critical times, and it’s interesting to see how interested they become on certain topics.
Although it’s important to teach your children about money with various teaching methods, the most important way to teach your children about money is role modeling.
Children are watching your EVERY move.
So if you are trying to teach your children these five money lessons, and they see you spending $8000 on an Hermes bag because you felt like maxing out your credit card this month, then it will be difficult for them to adopt the money lessons you have painstakingly try to teach.
You are their role models and they will follow what you end up doing and will likely adopt your money values.
Of course like all things parenting, it is easier said than done, so good luck, and I wish myself luck too!
What do you like to do when you are teaching your preschooler about money?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.