Building the Foundation: Early Money Concepts (Ages 3-7)

Even our youngest kids can grasp basic money concepts. It’s all about laying the foundation for healthy financial habits. Think of it this way: Building a house requires a solid foundation before adding walls and a roof.

• Understanding Needs vs. Wants:

My son threw a tantrum at the grocery store because I didn’t buy him a giant chocolate bunny. It was a memorable moment that taught him a valuable lesson about needs versus wants. Food is a need (we need it for growth and health!), while chocolate bunnies are a want (we like them, but they aren’t essential for survival). This understanding gave him a sense of accomplishment and empowerment, knowing he could distinguish between necessity and desire.

We sorted images of various items into “needs” and “wants” categories as part of an activity game. He giggled as we sorted pictures of broccoli into the “needs” pile and fire trucks into the “wants” pile. It was a simple activity, but it made him realize what is essential and what we desire.

According to a study published in the Journal of Consumer Research, children as young as three can understand the difference between needs and wants if presented with this information clearly and engagingly.

• The Power of Saving:

Delay gratification – those two words struck fear into my heart. But seriously, educating kids about savings is like giving them a superpower. My daughter desperately wanted a sparkly unicorn backpack, so we set a savings goal for her instead of buying it. Our daughter decorated a jar, and every time she earned money (from chores or gifts), she would deposit a portion of that money into a “unicorn fund.” Watching it grow was so fun for her! Once she achieved her goal, she was elated. She learned that saving takes patience and that achieving a goal was more rewarding if she worked at it.

Teaching kids about saving has many benefits. Research by T. Rowe Price found that children who save are more likely to manage their finances successfully as adults. They are also more likely to have a positive attitude towards money and feel control over their financial future.