KIds' money education starts in pre-schoolKids’ money education starts earlier than you think. Take some advice from Warren Buffett. Start early. How early? Pre-school. To read more of Buffett’s thoughts click here.

Most kids can’t read yet, but they know what money is and what it does. Kids see you swipe or tap and leave the store with stuff. They know what money does and they want their own.

Researchers at the University of Wisconsin-Madison report that by the age of 3 most kids are able to understand the basic concepts of value and exchange that are central to economics.

Yet most parents wait before starting to teach their kids about money. Consider these statistics.

When asked how old they were when their parents started discussing financial topics with them 30% of kids said their were 15.     T. Rowe Price

Parents themselves say that meaningful financial education should begin at age 18.     RBC 2017 Wealth Transfer Report

85% of parents discuss financial topics never, once a month or less, or a few times a month.     T. Rowe Price

Kids’ money education starts early

Parents play a big role in helping a child learn four important concepts in those pre-school years. Young kids can undertand and talk about these four money concepts. Kids play store because they understand the concept trading something (money) for something they want. As parents you can introduce and talk about some basics.

  1. Money buys stuff.
  2. You have to have enough money to buy something.
  3. Money can be cash or something that represents cash.
  4. It’s okay to not spend, aka save, so there is more money to buy something later.

Your kids want money because they see you using money. They want to decide how to spend it because they want to be independent. Of course, there is more to money than spending, but with young children when it’s “all about me” the activity of spending for self is the starting point. Having money is a big deal to a three-year-old. Going shopping and making decisions about using money is even more exciting.

Such a financial education can begin even before a child starts school. A child who starts early can have ten or more years of practice with money management in the safety of the home. Money, along with having total control and responsibility gives kids practice developing money management skill.

Conversation boosts kids’ money education

The pre-school years are a great time for you to show and tell as it relates to the world of money. You start by showing your child money in the form of cash and doing the activities in my book. The No-Cash Allowance. As your child learns about cash you tell how money works by explaining what you are doing when you use cash and cash substitutes (check, debit card, credit card, electronic fund transfer).

Parents don’t need to be experts to have a money talk with their kids. Money talks can short, during a car trip or at a meal. The very act of starting a dialogue about money will set the tone for helping your kids understand and learn from the people they look to for financial information.

As your family creates a comfort level with money talk you all benefit from the experience. And your kids’ money education will be off to a great start.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school through high school.