Teaching kids about money isn’t second nature for many parents. It’s common to avoid talking about money altogether, especially with children.

But financial literacy remains one of the top skills both professionals and parents agree is essential to long-term success and happiness. In short, these early conversations about money matter. 

"The conversations, events, feelings and beliefs that are programmed into our subconscious brain are formed between ages 0 to 7," says Jen Reid, financial planner and founder of BASE Planning. "This is why having positive engagements with money around your kids when they are young is very important to how they grow, develop and interact with money when they are teenagers and adults."

No pressure, right? Here are simple ways to instill financial lessons from an early age. 

How to teach toddlers and preschoolers about money

1. Model good money habits 

Involving your kids in the family finances early on doesn’t have to be complicated. 

"When we're at the grocery store, I talk about what items are on sale and why some items are higher priced than others," says Michigan-based mom of three Jenna Jonaitis. "We talk about gifts for family members and friends and how much we plan to spend. We explain why there are certain toys or clothing items we don't buy."

Jonaitis practices these money-saving actions each day on adventures with her kids, in the hope that they grow up and make good financial decisions themselves.

"We pack a lunch for the beach to save money and eat healthy," she says. "We share how we saved money for an ice cream treat, or that today we might split a cupcake instead of buying one for each kid. In these small, practical examples, we believe our kids learn about the world around them and how to make good decisions with their money."

2. Keep it simple with money toys 

A cash register and play money can be powerful tools to teach little ones about money and numbers, Reid says. "Keep it simple and just show them things — play games at home where they have a cash register," she says. Other great toys that teach kids about money include simple counting games, pretend wallets or checkbooks, and of course, a piggy bank. 

"Using games [or toys], they will learn to view money as something we exchange to pay for things and tasks," explains Janice Berner, CDFA, CPA, a Massachusetts-based financial planner. "We learn how people earn money at work or by performing services and how they save it to pay for things."

3. Use cash when possible 

Helping kids understand money starts with them actually seeing the exchange of, well, real money.

"Because of credit cards and tap pay, money is less tangible and harder to [understand]," Reid says. "Use cash as much as you can to help your kids understand and learn [about] money."

For Siobhán Alvarez-Borland, an Atlanta, Georgia-based mom of three, this starts in the grocery store. 

"I bring my kids with me to the store and talk to them about what I'm doing, even when they're too young to understand," she says. "For example, I might take a box of cereal off the shelf, point to the price and explain that while it's yummy, today we are looking for a box that is under $4. I'll encourage them to help me find a label that has a three on it."

She also gives her children the opportunity to earn their own money and spend it as they wish — with a catch. 

"I prefer to give my kids $1 bills, which help reinforce counting and cost," she says. "It also gives us the opportunity to learn about coins as change when they make a purchase."

How to teach Kindergarteners and elementary students about money

4. Go over basic concepts 

If your child is past the play cash register stage but still doesn’t quite understand how money works, now is the perfect time to impart some basic concepts. You can: 

  • Teach the values of bills and coins 

  • Explain how credit cards work

  • Talk about what needs versus wants are when deciding how to spend money

It’s also an ideal time to get them out in the world and figure out how to spend — or save — their money. 

"By elementary school, most children are able to understand how money works and even begin paying for items themselves," Alvarez-Borland says. 

5. Give an allowance

Only 9% of parents give their kids an allowance starting at 4 years old, one survey found. This jumps to 25% by the time their child is 7.[1] Parents award allowance for chores, good behavior, grades or simply based on age, the survey reports. 

There's another great reason to give an allowance: "For kindergarten and early elementary students, a great way to teach them about money is through an allowance that they earn for work they do to help out," Berner says. "To teach them about savings and spending, have [them create] two separate jars where they put the money they are using to save for something and funds they get to spend now. If you would like to teach them to do for others, you can add a third jar for money going to a charity of their choice."

The amount parents give their kids varies, but the survey found that it closely correlates with age: 4-year-olds get an average of $4.18, 5-year-olds get an average of $4.79 and 6-year-olds get an average of $5.82. 

6. Play games to build skills 

Introducing family games like Life and Monopoly is a fun way to teach older kids about money.

"What they learn in these games is cause and effect — and that smart choices get rewarded," Berner says. "By playing games with them, you are opening up a conversation and making it fun to talk about financial concepts."

Jonaitis suggests Monopoly Junior, Camel Up and Acquire for the elementary set.

"These games involve money in fun and different ways, allowing kids to see a variety of aspects of money: how it can grow, how it can be lost, how much things cost [and] how to budget," she says. 

Why early conversations about money matter

Kids are developmentally capable of saving money by age 6, studies show, so starting the money conversation early will help pave the way to financial literacy.[2] This translates into them making better money moves as adults. 

"The best tips I have for talking about money with kids is to start early and make it feel more like a conversation," Berner explains. "It’s important to keep it fun and tangible." For example, you might encourage them to save their allowance to contribute to a special family outing. And long gone are the days of treating money as an off-limits topic. 

"The way we view money, spending, saving and income as adults is directly tied to what our exposure to it looked like as children," Alvarez-Borland says. "If you grew up in a family that never talked about money and encouraged you to make your own to buy the things you wanted, it can be a real shock when you're on your own for the first time to understand how to balance a budget and not overspend. Good money habits are learned, as is a healthy relationship with money."