You will be able to teach young children that money runs out and that choosing one thing means giving up another.
Priya and her husband Marcus have three children, aged five, nine and fourteen. At the supermarket checkout, their five-year-old, Ethan, asks for the toy car hanging by the counter. Priya tells him they don't have money for that today, then taps her phone on the card reader. She can almost see him wondering why she doesn't just tap again.
Children form ideas about money far earlier than most parents expect. Much of what they learn comes from watching their parents. This module follows each of Priya and Marcus's three children in turn, starting with Ethan and the first stage, which runs roughly from age three to six. At this stage you are aiming for three ideas: money is real, money runs out, and waiting for something is a skill.
Young children copy what they see. When Ethan watches Priya pay by phone or card, all he sees is a gesture. Nothing visibly changes hands or leaves the wallet. To him, a phone that pays for groceries can look like a phone that pays for anything.
You can fill that gap by saying what is happening while it happens, in short, plain sentences. At the card reader, Priya could say: "Our money is in the bank. Tapping sends it from the bank to the shop. Now there is less in the bank." At the ATM she could say: "This machine gives back our own money that we put in the bank. It isn't free money." When she decides not to buy something, she could say: "We're not buying it today because we're saving for what we need this week."
Each of these takes a few seconds and happens every day. Over a year they add up to a child who understands that paying means giving something up.
A child needs to understand money they can touch before they can understand a number in an app. Coins and notes make money concrete: there is a pile, you hand some over, and the pile gets smaller.
Give your child small amounts of real coins to count and sort. Then let them pay for something small themselves, such as a snack at the neighbourhood minimart or a drink from the auntie at the hawker centre. Let them hand over the money and take the change back. Doing it physically teaches them more than any explanation you can give.
Keep their money in a clear jar. At this age a clear jar works better than a closed piggy bank, because your child can see the money grow when they add to it and shrink when they take some out.
Young children find waiting hard. That is normal, and it is the reason to practise early, because being able to wait for something better later underpins every money habit that comes after. A few weeks is a good length: long enough to feel like waiting, and short enough for a young child to stay interested.
Pick something small your child wants, such as a sticker book or a small toy. Give them a coin or two each week, perhaps for helping with a small task, and let them put each coin in the jar themselves. Mark the target on the jar with a line or a picture of the toy so they can see how far they have to go. When the money reaches the line, go to the shop together and let your child pay.
In this example, Ethan saves for a S$6 toy car over three weeks. He pays for it himself at the counter and carries it around for days.
The second idea at this age is that choosing one thing means giving up another. Adults call this opportunity cost. For a young child it just means "you can have this or that, not both." Lesson 7.1 of How money works, "Every dollar spent is a dollar not doing something else", explains opportunity cost for adults.
To practise it, give your child a small set amount in coins and offer two items that each cost about that amount. In this example the amount is S$3 in coins. The choice might be a packet of biscuits or a small toy, or a comic or a pack of stickers. Let them hold both items, think it over, and decide.
Once they have chosen, let them live with the choice. If they regret it, don't buy the other item as well. A small regret at five over a few dollars is a cheap way to learn something that costs much more to learn at twenty-five.
Keep the amounts small and the choices real. That way your child feels what giving something up is like without picking up the idea that the family is short of money.
Look at your week ahead and find one ordinary shopping trip where your child could make a choice like this, with a set amount in their hand.
Choose one shopping trip this week. Set an amount and let your child pick one of two items within it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).