You will be able to teach young children that money is limited and choices have trade-offs.
Priya is at the supermarket checkout with her five-year-old, Ethan. He wants the toy car hanging by the counter. She says no, they do not have money for that today. Ethan watches her tap her phone on the card reader, and she can almost see him thinking: then why not just tap again? To a five-year-old, a phone that pays for groceries looks like a phone that pays for anything.
Children form ideas about money far earlier than most parents expect, and much of what they learn comes from watching. This lesson covers the first stage, roughly ages three to six, when the goals are simple: money is real, it runs out, and waiting for something is a skill. Priya and her husband Marcus have three children, aged five, nine and fourteen, and this module follows each of them in turn.
Young children copy what they see. When they watch you pay with a phone or a card, they see a gesture, not a transaction. Nothing changes hands. Nothing leaves your wallet.
So explain what is happening, in short, plain sentences, while it happens. At the counter, Priya can say: "This is our money from the bank. When I tap, the money goes from our bank to the shop. Now we have less in the bank." At the ATM: "The machine is giving us our own money that we put in the bank. It is not free money." When you decide not to buy something: "We are not buying that today because we are saving our money for the things we need this week."
These moments take a few seconds and happen every day. Over a year they add up to a child who understands that paying means giving something up.
Before a child can understand a number in an app, they need to understand money they can touch. Coins and notes make the idea concrete: there is a pile, you hand some over, and the pile gets smaller.
Give your child small amounts of real coins to handle. Let them count them, sort them, and 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 receive the change. The physical act of giving money and getting something back teaches more than any explanation.
A clear jar works better than a closed piggy bank at this age, because the child can see the money grow as they add to it and shrink when they take some out.
Young children find waiting hard. That is normal, and it is also why it is worth practising early, because the ability to wait for something better later is one of the foundations of every money habit that comes after.
Pick something small that your child wants, a sticker book or a small toy, and help them save for it over a few weeks. Give them a coin or two each week, perhaps for helping with a small task, and let them put it in the jar. Mark the target on the jar with a line or a picture of the toy. When the jar reaches the line, go to the shop together and let them pay.
A few weeks is long enough to feel like waiting and short enough for a young child to stay interested. Ethan saved for a S$6 toy car over three weeks, in this example. When he finally paid for it himself, he carried it around for days.
The other lesson at this age is that choosing one thing means giving up another. Adults call it opportunity cost. Lesson 7.1 of How money works, Every dollar spent is a dollar not doing something else, explains the idea for grown-ups. For a young child, it simply means: you can have this or that, not both.
Give your child a small set amount, say S$3 in coins in this example, and let them choose between two things that each cost about that much. A packet of biscuits or a small toy. A comic or a pack of stickers. Let them hold both, think about it, and decide. Then let them live with the choice. If they regret it later, resist the urge to buy the other one too. 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 one thing up is like, without ever 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.
Pick one shopping trip this week where your child chooses between two items within a set amount.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).