Five- and 6-year-olds are starting to develop the cognitive skills necessary to understand basic monetary concepts, such as identifying coins, figuring out how to count change, and matching small amounts of money to items they want to buy.
Aside from acquainting kids with the basics of economics, money lessons have other benefits. "Money is a stand-in for many of the values we want to teach our children," says Janet Bodnar, author of Dollars & Sense for Kids (Kiplinger Books). "If youngsters learn how to spend wisely and delay gratification, they will develop patience and planning skills in other aspects of their lives."
To increase your child's money smarts, try these strategies:
If your child wants something big, such as a new hardcover book or a toy, help her figure out how much she needs to save each week in order to buy it. Make sure she has a clear plastic bank so she can watch her money grow. However, Dr. Blackburn advises teaching kids to do more with their money than spend it on themselves. She suggests encouraging them to donate part of their allowance to charity.
The majority of experts agree that a child's allowance should not be tied to household chores. "Children should help out around the house because they are part of the family, not because they are being paid," says Irene Leech, Ph.D., an associate professor and extension specialist in consumer education at Virginia Tech University, in Blacksburg.