My 5-year-old knows how to save..here's why?
“Finance for kids” might sound like a big, serious topic—but it doesn’t have to be! In fact, it’s one of the most important life skills we can begin teaching our children, starting as early as preschool.
Of course, a 5-year-old doesn’t need to know about bank accounts or budgets just yet. At this age, it’s all about introducing the basics:
What is money? Why do we need it? And how can we make smart choices with it?
Let’s explore the foundational financial concepts, explained in ways that make sense to little minds.
1. Money
Children l explaining that money is what we use to buy the things we want or need.
Use real or play money to show how it works. Turn shopping trips into fun, teachable moments.
2. Bank
A bank can be described simply as a safe place to keep money—just like a toy chest or hidden treasure box.
Let your child make their own “bank” at home using a jar, envelope, or piggy bank.
3. Earn
Teach them that people earn money by doing jobs. Give them small, age-appropriate tasks—like setting the table or puttif they complete these consistently, reward them with a coin, sticker, or small prize based on your family’s approach to rewards.
4. Save
This is a great age to introduce the concept of saving.
Kids often want things now, but learning to wait and save up for something special helps them build patience and self-control.
5. Spend (Expenses)
Spending means using money to buy something.
Take your child grocery shopping and explain how we give money to get food and supplies. Let them “pay” for a small item and experience the exchange.
6. Goal
Set a simple saving goal with your child—maybe a new toy or game.
In my home, we use a piggy bank. Whenever my child earns money, it goes there. After a few weeks or months, he gets to use it to buy something he’s been saving for. It’s exciting, rewarding, and educational.
7. Choice
Teaching kids that they can’t have everything at once is an essential life skill.
Explain that a choice means picking one thing and leaving something else behind—and that’s okay.
Learning Through Play and Stories
Children learn best through play.
We do pretend grocery shopping at home, role-play with toy money, and read books about spending and saving. Stories are especially powerful in helping kids understand abstract ideas. For example:
Penny the bunny got three shiny coins for helping Grandma sweep the porch.
“I want to buy a big lollipop!” said Penny, hopping with excitement.
She bounced to the candy shop and saw the lollipop cost two coins.
Just as she reached for it, her friend Max said,
“Hey Penny, are you saving for that bunny doll you wanted?”
Penny paused.
She looked at her coins. She had three.
If she bought the lollipop, she’d only have one coin left.
The bunny doll cost five coins. She was so close!
Penny thought hard.
Then she smiled and said,
“I’m going to save my coins today! I’ll get the bunny doll soon!”
Max clapped his paws.
“Smart choice, Penny!”
Penny dropped her coins in her "Save Jar" and felt proud.
That night, she told her mom:
“Saving helps me get something really special later!”
Financial literacy at age five is less about numbers and more about mindset.
It’s about teaching your child to understand the value of money, how to make choices, and how to wait for something truly worth it.
Start simple. Keep it fun.
And remember: the money habits they build now will grow with them for a lifetime.
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