Once children are past putting pennies in their mouths, you can start teaching them about the value of money. After all, children are curious about money, especially coins. Here are a few simple techniques for teaching preschoolers the value of money. (Close supervision of young children is necessary with small objects.)
Place a nickel on the left side of a table, and place five pennies on the right side. Explain to the children the value of the nickel as it relates to the pennies. If you continue this strategy using dimes, quarters, half dollars, etc., before you know it, the children will have mastered the art of not only counting money, but understanding its value as well.
Preschoolers are old enough to learn to choose between a set of alternatives when you give them a small amount of money. The amount should be small enough that losing it won’t be a big issue. You can start out by having the children choose between two treats at a pretend store. Have a a few objects such as candies, cookies, etc., and allow the children to exchange their pennies or nickels for the goodie of their choice. Once they have learned to spend their money in this simple fashion, you can take them to the real store to learn about handing the money to the store clerk for their goodies.
Saving for Something Special
Once the children have mastered the value of a nickel over a penny and a quarter over a nickel, and have learned how to pick the best buy for their money, they are ready to learn how to save their money for special things, such a a picture book or a small toy they've had their eye on. They'll learn how to count their money, how much they need in coins to buy their special object, and how to save so much of their money so they can still enjoy the simple things while saving for the special things. This also teaches them they have options when it comes to money. This is a great time to start teaching them to put part of a birthday present in a penny bank or take them to the real bank so they can put their money away where it is safe until they need it.
Most children grow up learning from some form of allowance system. An allowance helps children learn to plan for future expenses and set aside some for future use. It also teaches them that the amount of money they have is limited, especially when they have to choose between different alternatives such as buying a candy bar and saving some of their allowance for the sparkly ball at the department store. Providing children with an earned allowance is a great way for parents to teach children how to set a budget and keep a record of their money. Obviously this exercise needs to be geared to the age of the child, but even preschoolers can learn these exercises easily.
Money Makes Money
A great way to teach children about the value of saving money is to show them that money being put away in a bank account, or even in their penny bank, is busy earning interest (making more money for them). For very young children, use two containers and a little change to teach them about interest. Mark one container 'S' for savings and the other 'I' for interest. When a child puts a quarter in one jar (the savings jar), you put a nickel in the other jar (the interest jar). The children will understand that money can work for them, and they'll be inspired to participate in a savings program. Use the child's bank book as a real life example. Show them when they have earned interest and how their $20 is now $20.50, and how, over so many months, it will be worth even more.