How To Talk About Money To Your 5 Year Old

As parents it is our task to teach our children all those important things in life, like about safety in traffic, manners and life skills like cooking and maintaining the household. However, even though money is an important part of life, it doesn’t get spoken about at home! So here’s some ideas on how to talk about money to your 5 year old.

Why you should talk about money to your 5 year old

Money is an important part of life. No matter how you want to phrase it, it is what makes the world go round.

For some reason money has become a taboo topic, in fact, people would rather talk about their weight or sex life than their finances (article here).

One reason money might have become a taboo topic is that often people believe that our value as people is tied to how much we earn or have (article here).

Hence, revealing how much you earn or have, would be revealing how much value you have in the society.

The comparison can cause shame and jealousy. Especially if the mindset is that of scarcity rather than abundance. (More about scarcity and abundance here.)

But the silence around money is actually hurting us, and especially our children as they grow into adulthood without much guidance about money matters.

It’s never too early to start including your children into money conversations at home, although you do need to take their age into consideration.

When you talk about money with your 5 year old it lays the foundation for future lessons about money and an understanding the relationship between money and the things around us.

This can lead to them understanding why their parents need to work, and that toys don’t just magically appear, instead we need to give something in exchange.

Being included in the conversation can also be empowering to children and help grow their money confidence from the get go!

Money topics to discuss with your 5 year old

A 5 year old is still quite young, so money needs to be discussed on a quite superficial level with concrete examples.

For demonstrating money, cash is the best as it is something physical and easier for younger children to understand.

Here are a few conversation topics to discuss:

Where does money come from?

You child probably already knows that you, or your partner, works. But have you actually told them that that’s were the money to buy things like food, toys and their clothes comes from?

At this age there is no need to go in to too much detail, you can just tell them that when you go to work you do *add simplification of your job* and since it is helping someone out they give you money for doing it.

You could add a comparison to them by pointing out a chore that they have done and received something in exchange.

An example:

“When I go to work I help people in the cafe to get their food and drinks. The cafe needs my help so they give me money for doing it. Kind of like when you helped your grandma wash her car and she gave you some ice cream for doing that, remember? You helped her wash her car so she gave you ice cream for it, that is kind of like work! But instead of ice cream, I get money for helping. And then I can use that money to buy some ice cream for us.”

If you are not working for whatever reason, you can still explain where your money comes from. You can say that sometimes people can’t work because they want to stay home with their children for example. And that’s when they get money to help pay for food and such.

What is money for?

Money isn’t just for things right now, but also for things later on, both wants and needs.

This might not be the easiest concept to grasp because things right now often seem the most important to younger children. They live very much in the moment!

But at this age money conversations are all about planting seeds for later on.

You can share with them the things that you are saving money for (or might save money for). They could be things that you want or need, or that they want or need.

The main thing to explain is that instead of spending all your money when you get it, you put some aside so you can buy those things later.

If you have a savings account, you could even show the balance to them, and show it to them again as it grows. Then include them when you have saved enough and it’s time for the purchase (especially if it is for them!).

How they can start earning money too

You can give them an opportunity to start earning their own pocket money with age appropriate jobs and age appropriate sums.

This is a great way to introduce money management in practice, and how you have to do something first (the chore) to get something in return (the money to buy what they want).

Setting the system up is crucial for it to work and to teach the right values.

The needs to be clear rules around the chores (which chores, at what quantity/frequency, how much will be paid) and the expectations (what they can/should do with the money).

The main things to teach are that they need to sacrifice their time by doing something that they might not prefer to do (the chore) to get something they want (what the money they get will buy) and delayed gratification, which is saving money for later to get something bigger they want. I talk about delayed gratification here.

Including them in the purchase process

An easy way to introduce money to your 5 year old is also including them in the purchases process at the shops.

This is easiest to demonstrate to them if you use cash, as then they can see that you are physically giving something away (money) in order to get something else (whatever it is you are buying).

A great way is if they have their own money to use that. Then they have the experience that they have to give something of their own away to get something else. Here’s a blog post I’ve written on how I have implemented money introduction with my own 3 year old daughter and her first experiences of “working” and buying things.

I hope this post has given you some ideas on how to approach the subject of money with your own kids!

Where are you going to start?