In times like these—nearly a decade after the Great Recession and in the midst of the current crisis—teaching your kids the value of a dollar is more critical than ever. Doing so equips them to weather life’s inevitable storms, and benefits them when times are more normal, too.

The good news? Young children have an incredible capacity to understand and learn about handling money. In fact, they can grasp financial concepts as early as age three, and by age seven many of their financial habits are already set¹.

Easy ways to help your young kids understand money

When it comes to teaching money management, getting down to the brass tacks with your kids is well worth it—and can even be a lot of fun. Here are four ways you can teach younger kids important money lessons that will help them learn the value of money—and how to become world-class savers.

1. Illustrating the power of growth with pennies

Fully appreciating the power of growth as it relates to compound interest can be a tough concept for adults, let alone younger children. A great place to start is by using the pennies-in-a-bowl method. The idea here is that you start with 10 pennies in a bowl and set up the expectation that every day the bowl will earn 10% interest, which means you’ll add a penny—with a goal of turning those ten pennies into twenty dollars! Once the bowl hits 20 pennies, you’ll add two pennies to the bowl each day, which continues when the bowl hits 30 pennies and 40 pennies as well.

Take time every few days to count the pennies in the bowl with your kids to show them how much the total is growing. After two months, they’ll have a little less than $20 saved when you account for the interest earned—all from starting with the small investment of just 10 pennies. Don’t forget to highlight that in order to get to the $20 that you have to leave the pennies in the bowl. If you spend your pennies before they accumulate, you will won’t get to your ultimate goal of $20, or it will take you a lot longer since you will start over each time you spend the pennies in the bowl.  This will help reinforce how important it is to be a world-class saver.

2. Introducing money through play

Learning through play can be a good way to talk to your kids about money. For example, during playtime you could pretend one of you owns a store and the other one is going shopping, and then include each part of the experience that would involve spending money.

This is a great time to introduce the concept of “wants and needs.”  Deciding where to spend a limited amount of money—even if it’s play money—is a great opportunity to let kids figure out where they’d like to spend their money and how to tell the difference between a want and a need.  As part of your play, let them be artists, too, by having children create the money for your play “economy.” Share pictures of what our real currency looks like, explain the denominations of our coins and paper, and ask them to recreate their own. You can have fun with it by encouraging them to draw the faces of the people in your family on their money in place of presidents.

3. Using an allowance as a teaching tool

Setting an allowance is another simple way to set your child up for success by allowing them to earn money through chores and household work. You can even take it a step further and use jars to introduce different types of “accounts” to your child. For instance, one jar could be used as a savings account for a larger purchase. The other could be used as a checking account for smaller, short-term purchases.

You can also allowance apps like GoHenry, which allows you to electronically distribute money while using the app’s tools to teach your kids about good money habits. Or you could use chore-allowance hybrid apps like Pennybox, where you can request a photo of completed chores before releasing money to your kids.

4. Teaching through digital games and apps

In addition to “analog” methods of teaching your kids, there are lots of fun games and apps that meet your kids where they are (on a smartphone or tablet) and instill valuable lessons about money. Peter Pigs Money Counter is a great way to teach kids to identify, count and save money². The United States Mint also provides lots of interactive games³, including Counting with Coins, where players learn to identify U.S. currency and can then use their knowledge to budget for fun activities like grocery shopping for a camping trip.

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2022-138132 Exp. 5/24