A Penny for Your Thoughts: The Preschooler's Understanding of Money

Betsy Brown Braun
May 29, 2014

A Pre-K teacher friend does a Circle Time activity wherein each child chooses either a nickel or a penny with which to buy a pretend donut. Inevitably, she says, they all pick the penny. Why? Because it's shinier!

Give a three-year-old the choice between a nickel and a dime, and he will choose the nickel. Why? Because it's bigger!

As is the case with all learning in typically growing children, there is a developmental component to a child's understanding of money. It starts with simply knowing that money is something of interest. Grown-ups have it, and so I want it!

Very early on, young children begin to notice everything that Mommy and Daddy do. That includes using money.  While more and more people use credit cards for the majority of their transactions, coins and bills still have the power and are the foundation of the lesson. Your child watches you slip a quarter into the parking meter, a nickel into the gumball machine, hand a dollar to the man at the Farmer's Market in exchange for a basket of strawberries. And so begins the young child's first lessons about money and in economics, for that matter.

But learning about money is part of learning math. It comes with the basic comprehension of numbers and quantity. Have you ever watched a two year old count? Parents love to showcase their brilliant child's (especially that first born!) ability to flawlessly count to 10.  He counts all 7 items on a table, all the way to 10. He does it with 5 items, with 13 items, or just 2, and they all come out to 10! The child has memorized the sequence; he is not actually counting. (But it still gives us bragging rights!)

All this is to say that it is unreasonable to expect a preschooler to understand money. It is not a developmentally appropriate lesson, not yet.

There are money activities and lessons , however, that are age appropriate for the preschool age child.

  • Allow your child to have a piggy bank if he shows an interest. Young children love to collect things in a container...and then dump them out.
  • Give your child a play wallet. He loves to play grown up. No need to fill it with anything besides a few pennies. Remember, he doesn't know the difference. And a pretend dollar bill with his name on it may just do the trick.
  • Help your child to sort and name the various coins. This activity is not only about money, but it is an important lesson, basic to math, that involves recognition of shape and size, sorting and categorizing.
  • Allow your child to put the coins in the meter. Not only does this help his fine motor coordination, but it teaches him the way the world works.
  • Allow your child to hand the money to the vendor. Here, too, he learns about the exchange of money for goods, the start of his lesson in economics.
  • Refrain from allowing your child to pick up loose change that is lying around. Part of the money lesson is about ownership. Another is about how we get money, and it isn't by taking what isn't yours!
  • Be careful not to give your child too much. While it may be Grandpa's pleasure to hand your child a five dollar bill, it isn't helpful. In fact, a single and a five dollar bill pack the same punch for the preschooler. Giving a child too much sabotages his early lessons in money value.
  • Hold off on the allowance until your preschooler is older, around seven years old. Occasionally paying your child some coins for a task well done will not hurt. But beware of creating the expectation of payment for services. Young children love to be helpful because it makes them feel competent and significant. They need not be paid.

More information about allowances and teaching older children the value of money can be found in Betsy Brown Braun's book You're Not the Boss of Me.

Originally published in 2011. 

From the Parents

  • Parent # 1

    When my son was four, he had a decent grasp of the concept of money. However, he didn't understand the concept of greater than or less than, so telling him that he couldn't spend more than a certain amount was hard for him to understand because he didn't really know that $4 was more than $3, but less than $6.

    over a year ago

  • Parent # 2

    I like your tips, but I think it's OK to let your kids pick up loose change from beneath car seats, in the sofa cushions, etc - as long as that's accompanied by a conversation about ownership and what is/isn't appropriate to keep for oneself. Have a rule that they have to have a discussion with Mom or Dad before keeping any change they find. Discovering loose change here and there is one of life's little pleasures!

    over a year ago

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