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Best 8 Ways to Teach the Concept of Money to Your Preschooler

Money is a tricky concept to understand, even for adults. So, it's no wonder that teaching your preschooler about money can be a daunting task.

But it's important for them to start learning at an early age so they can develop good financial habits down the road.

In this blog post, we will discuss some tips on how to teach your preschooler the concept of money. Keep reading for helpful advice!


Best 8 Ways to Teach the Concept of Money to Your Preschooler

Now, let's take a look at 8 of the best tips that can help familiarize your preschooler with the concept of money.


Help Them Develop a Habit of Saving From a Young Age

What you teach your kids at a young age sticks in their minds for years to come, and one of those things is the concept of saving money. One very important way to teach your preschooler about money is by helping them develop a habit of saving.

This can be done by setting up a piggy bank or designated saving jar and having them put aside a certain amount of their allowance or gift money each time they receive it. Encourage them to set savings goals, such as saving up for a toy or trip, and discuss the benefits of saving. When they grow older, you can open a savings account for them.

You can also involve them in practical saving activities, such as setting aside money for a rainy day fund or helping them compare prices at the grocery store to find the best deals. Teaching children about saving from a young age will set them up for financial success in the future.


Show Them How to Count Money and Teach Them about Different Denominations of Money

The most basic way to start teaching your preschooler about money is to familiarize them with your local currency. In order to help them understand the concept of money, you have to first explain to them what money is and why it is used. Then you can talk about the denominations and their values.

Once you have explained what money is, you can show your preschooler how to count it. You can start by counting out a few coins with them. Then, you can have them practice counting by themselves. Once they have mastered counting, you can move on to teaching them about adding and subtracting money. 

It is also important to teach your preschooler about different denominations of money. You can start by showing them the different coins and explaining what each one is worth. Then, you can move on to paper bills and explain how those work as well.


Help Them Understand the Difference between Wants and Needs

Another important lesson in financial literacy is understanding the difference between wants and needs. Explain to your preschooler that while it can be fun to buy things they want, it is necessary to prioritize purchasing the things they need (such as food and clothing) first.

You can also involve them in budgeting by giving them a set amount of pretend money to use for a shopping trip and having them choose between items they want and the things they need. This will help them understand the importance of prioritizing spending on necessities before splurging on non-essential items. 

This is a very easy tip, but it can be very effective for your preschooler in the long run. When they move into professional or practical life, these concepts can be of great help to them.

People who are not taught these concepts at an early age tend to make impulsive shopping decisions, and then they have to borrow money from other people to fulfill their basic needs. So no matter how much you like a certain thing, don't buy it unless you have already bought the things you need to fulfill your basic needs and also after you have taken a portion out for your savings account.


Lead by Example: Bring Them along When You Are Going Out For Shopping

In addition to direct teaching, modeling good financial habits can also help your preschooler learn about money. Bring them along when you go shopping and involve them in the decision-making process, such as comparing prices or looking for sales and discounts.

You can also discuss with them why you may choose not to purchase something, whether it is because it is not necessary or not within your budget. Showing them the real-life application of money management will help reinforce these lessons.

In some cases, this can be more important than just telling your kids about money or roleplaying shopping scenarios with fake money. Once your child sees the shopping scenario play out in real money, they will better understand the concept and value of money.


Find Children's Books about Money

Children's books are a great resource for teaching preschoolers about any topic – including money! There are many great books available on Amazon or at your local library which can introduce your child to key concepts like earning, spending, saving, budgeting, and charitable giving in a fun and engaging way. Kids usually don't like to read books unless and until they have pictures in them. So try to find books that use cartoons and other images and creative ways to teach the concept of money to preschoolers. Kids will find these books fun and informative at the same time.


Give Them a Commission Instead of an Allowance

Parents usually give their kids weekly or monthly allowance. However, if you tell your kids that they have to earn their allowance by doing chores and working around the house, then not only will it make them more responsible from a very young age, but it will also help them understand the concept of money.

When they grow up, they feel become more independent and financially more sensible. This will help them understand that nothing in this world is free and that you have to work hard to earn a good living. 

People who don't understand the value of hard work may not be that successful in the long run. Not only will it be hard for them to find work and earn money, but once they start earning, it will be hard for them to manage that money. These people will not be able to set financial goals in life. 

So the practice of commission of allowance from a very young age will prepare your kid for their future life where they will know that in order to achieve their financial goals, they have to be efficient and work hard in their profession. 


Play Money Games with Them

Kids love to play games, so if you want to make them understand a vital concept like money management, then one of the best ways to do that is by incorporating it into a game. You can start teaching your preschooler about money by playing games with pretend or play money. This can help them understand the value of different denominations and how to count and exchange money. 

You can set up a pretend store, give your child play money, and have them "buy" items using the money. You can also play games like "coin sorting," where you give your child a pile of coins and have them sort them by value, or play "money memory," where you lay out several coins in different denominations and have them try to remember the values and amounts. You can try out these cool math games to improve your child's calculation skills.

Additionally, you can introduce real money into the mix by giving your child small allowances and having them practice counting them and making purchases with them. This can help them understand the practical aspects of handling money in real life.


Teach Them the Importance of Charity

When you are teaching your preschooler about the concept of money, then it shouldn't be limited to earning and saving money. You should also familiarize them with the concept of charity. Giving money to charities is also a money concept that your children should learn from a very young age.

One of the most crucial aspects of money is learning to share it with those in need. You can explain to your child that donating money or volunteering time can help others and how it makes us feel good to do so.

Providing real-life examples and opportunities for them to participate in charity work can help reinforce this lesson. When you are teaching the concept of money to your preschooler, also make sure to emphasize the importance of giving to the poor. It is never too early to instill the values of generosity and compassion.

Another way to teach about charity is to set aside a portion of their allowance or earnings for donations. Encourage your child to actively decide on a cause or organization they want to support, and help them research and make informed choices before donating. This not only teaches them about charity but also helps them understand the value of budgeting and saving.


Why Is It Of Utmost Importance That Preschoolers Learn The Concept Of Money?

Learning about money at a young age helps to lay the foundation for good financial habits in the future. It teaches preschoolers the value of saving and spending wisely, as well as the importance of setting and achieving financial goals.

Understanding these concepts can lead to greater financial stability and success in adulthood. Additionally, being knowledgeable about money can help children make informed choices about their own financial well-being and avoid potential scams or fraud situations. Overall, teaching preschoolers about money can have a positive impact on their overall financial health and future success.


Downsides of Not Teaching the Concept of Money to Your Preschooler

In addition to missing out on potential future financial success, not teaching your preschooler about money can also lead to:

· Poor decision-making skills. Without a basic understanding of the value of money and how it is earned and spent, children may struggle with making wise purchasing decisions and budgeting their funds effectively.

· They may also have a difficult time making financial decisions and could potentially fall victim to scams or bad investments. The worst part about all this is that these days there are uncountable scammers online that are just waiting for people to make one mistake so that they can steal your money. If your child has a good understanding of money and finance, then they would be easily able to identify scams.

· Not teaching them about money can also lead to impulsivity and overspending, leading to financial problems later in life. We all love to wear good clothes and have good, unique things in our lives. However, these things should never come at the expense of our basic needs. 

· It can also create a disconnect between the value of things and the actual cost, leading to a lack of appreciation for hard-earned money. 

· People who are not familiar with the concept of money may end up ignoring the importance of "value." If you want to buy something, then buying cheap isn't always the financially sensible option. You have to understand the value you are getting out of the purchase.

For example, if you are looking to buy a mobile phone and you have two options in front of you. A $500 mobile phone with 10 features and a $600 mobile phone with 20 features. The first mobile phone may be cheaper, but with the second mobile phone, you are getting 10 extra features for the amount of an additional $100. So the second mobile phone offers more value, and the better financial decision would be to buy the second phone. Of course, this depends on your current financial situation and your long-term financial goals as well. If your priority is to save money, then the first option would be better for you. 

· Without an understanding of money, your child may not fully grasp the concept of work and how their efforts translate into earning income.

· This can also lead to a lack of motivation to work hard and provide for themselves in the future.

Overall, not teaching your preschooler about money can have negative consequences for their financial well-being in the long run. It is important to equip them with this knowledge early on so they can make smart financial choices as they grow older. If you have difficulties in coaching your own child, engage a professional preschool tutor to help you.



Teaching your preschooler about money can have many long-term benefits for their financial success and stability. It is important to not only educate them on the practical aspects of handling money but also instill values such as saving, generosity, and budgeting. Start introducing these concepts early on and provide real-life opportunities for your child to practice and apply their knowledge. This will set them up for a strong understanding and successful relationship with money in the future.


Related articles:
7 key differences between local and international preschools
10 effective parenting tips to handle your preschooler kid

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Tutor City's blog focuses on balancing informative and relevant content, never at the expense of providing an enriching read. 

We want our readers to expand their horizons by learning more and find meaning to what they learn.

Resident author - Mr Wee Ben Sen, has a wealth of experience in crafting articles to provide valuable insights in the field of private education.

Ben Sen has also been running Tutor City, a leading home tuition agency in Singapore since 2010.