That kids need to learn about money is somewhat of a given. Not all parents and caregivers are clear about when they should start teaching their kids the basics, however. These signs may signal that your child is capable of moving forward.
1) He has a sense of numerical value.
Kids are not born with an understanding of what “one” means. Even so, they must gain this understanding to work with money, because just about all money systems are built on multiples of an individual unit. For instance, in the United States, the smallest money unit is the penny, which is worth one cent. A nickel multiplies the penny by five and, therefore, is worth five cents. If your child can recognize numerical value with objects around your house and also can recognize the written digits that represent different values, he’s likely ready to start working with money on a very introductory level.
2) He shows interest when you make purchases.
Most little kids quickly learn that if they perform one behavior, they get a specific response. A classic example is the toddler who learns that, if they lift up their arms and hands, mommy or daddy will pick them up. Eventually, kids start to clue in to the fact that, if you hand someone money or swipe your piece of plastic, you get something in return. They might start asking if they can hand over the cash or pull your credit card through the reader. They also might show an increased interest in vending machines.
3) He visually can distinguish between different coins, bills or cards.
In most money systems, agencies that issue currency make a conscious effort to make bills and coins look and feel different. This way, people can distinguish between the money pieces more easily, which makes transactions go more smoothly and makes instances of fraud less likely. When kids are very little, their tendency to generalize might make understanding the differences between the currency pieces difficult. In much the same way they label all four-legged animals as dogs, all coins might be pennies, for instance. Your child isn’t quite ready to start on his financial journey until he can be very specific about which piece of money is which.
4) He can keep track of physical items.
When your children are older, they’ll be able to work with money in the abstract, such as in an online bank account—that is, they’ll be able to manipulate the tools and numbers that represent, but which are not truly, money. For young kids, though, working with money in the absolute—having bills and coins they can see and touch and feel—is much easier to understand. If they are constantly losing track of their coins and bills, however, it becomes nearly impossible to save well, get together money for spending or get an accurate picture of how much they have at their disposal. Giving your child a routine for money handling, such as always giving him his allowance in the evening before bed, and providing a special place to put it, such as a piggy bank or purse, can help your child in this area.
5) He can identify things he would like to have.
To a child, a coin or a bill isn’t necessarily that exciting, as it’s not like a toy or other play item that can entertain. It becomes exciting to a kid, however, when he understands that it can be traded for something else. They might not want the coins or bills themselves, but they likely want what it can buy. When your child can pick out something specific he would like to purchase, be it gum, a video game or a new bike, its time to start discussing money not only in terms of relative value, but also in terms of basic goal setting.
6) He starts recognizing or asking about different jobs.
Kids eventually start to recognize that mommy or daddy go to work and that other people have different jobs. This naturally leads to some curiosity about why people work in the first place and why some people are paid more than others for what they do. Kids who are old enough to understand that money is earned are usually old enough to start applying the concept of work for pay through simple chores.
Knowing when to start working with your kids with money is simpler if you look for a handful of signals, such as their ability to recognize jobs and show interest in purchases. Once you see these signs, start slow and be patient—your child will “get it” in time.